Business & Finance

Important Financial Statements to Hold On To

If you’ve decided to declutter your home desk, you’re probably wondering what to do with the drawers of financial documents you’ve found. When it comes to making sense of financial statements, most people opt for the safe option to keep everything. But several years later, you find yourself holding piles of invoices for purchases you’ve long forgotten. 

Can you throw some of these away, or do you need to keep everything? Whether you are a business owner, a self-employed professional, or a stay-at-home dad, here’s a simple guide to help you make sense of your financial statements. 

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Store away safely

The first thing you need to consider is your storage solution. While some financial statements can be safely disposed of (goodbye old and dusty invoices), you need to find a safe location to keep all your important documents. Depending on the type of statements you work with, you could choose a combination of physical and electronic storage solutions. 

Physical documents

One thing is for sure: Paper statements do not belong at the bottom of a drawer. Ideally, you want to keep confidential financial information in an area that will protect them from damage, theft, and unwanted eyes. Once you don’t need statements anymore, it’s essential to dispose of them safely. We strongly recommend using a shredder before getting rid of confidential information that isn’t required anymore. 

Electronic documents

Electronic storage is the best solution for all digital invoices and financial data. If you are keeping financial statements digitally, you want a secure storage option that will ensure authorized access to your data. Ideally, your storage solution should also have a backup feature, or you could create one yourself. We would also suggest digitizing paper statements for added safety. 

One month financial statements

Some financial statements can be disposed of within a month. You typically don’t need to keep deposit slips, bank withdrawals, and utility and service bills longer than one month once you’ve clarified that the transaction has been verified. Self-employed individuals are an exception as they could need utility and service bills as part of their tax filing. 

One year statements

You should always keep your credit card and bank statement for a year, whether paper or digital copies. If you are employed, you need to keep your pay stubs long enough to check that the Form W-2 is accurate. 

Three to seven years statements

You can consult the IRS website to understand how long you need to keep tax supporting documentation. The IRS recommends keeping records for 3 to 7 years, depending on your situation. Bookkeeping information relevant to the business years will also need to be kept. 

Keep permanently

You will need to keep your tax return indefinitely as they are part of your financial history. If you are using an automated booking accounting system, you can keep bookkeeping statements and preparations for your tax filing as well. 

You will also need to record permanently substantial financial events such as inheritance, for example. 

When it comes to decluttering your office desk, making sense of your financial statements is crucial. While it might seem additional work, organizing your finances per date and category can save you precious time in the future.