Keeping track of your financial records is an important part of keeping your financial life in order and also helps when preparing your taxes. Records that support information on your tax returns should be kept for up to at least seven years in case you get audited.
One suggestion is to keep bank statements for one year or longer if they contain information that will be needed to validate your tax return information. One important tip is to at least keep bank statements for a few months or more so you can reconcile your bank account at the end of the month and check on possible errors made by the bank.
Suze Orman suggests keeping bank statements for at least two years if you are planning on applying for a mortgage, car loan, HELOC or some other loans. After the recent credit crisis, some lenders require more financial information than in the past. In many cases, they will want to see what your income and expense history has been over the past couple of years to confirm your ability to repay the loan.
Most banks keep copies of your statements for a certain amount of time. If your bank does and it is easy to get copies, you may not need to keep your own copies. If you have access to your bank account online, some banks urge you to get your bank statements electronically. This saves the bank the expense of processing the statements and postage costs. By getting the statements electronically, you are able to save them to your computer and save the hassle of printing out and storing the paper statements if you wish. Even though you get your statement electronically, it is still important to check your statement each month to make sure there were no errors made. Check with your bank to confirm how long they keep bank statements and what the process is to access them.
If you have a file system set up to file your invoices and other information regularly, it will make tax return preparation a lot easier and less time consuming. Some people that do most of their banking and bill paying online may not pay as much attention to their financial situation as they did when they handled their paychecks and bill paying with actual checks and statements.
When you do throw away your bank statements and other financial records with pertinent information, make sure you shred them or otherwise dispose of them so you are less likely to be a victim of identity theft. Even though there other ways for people to access your records and accounts, each additional precaution you can take to protect yourself helps.
There are no strict rules of how long to keep financial records, but there are some guidelines of how long to keep certain records. Your bank statements should be kept at least one year or longer if they verify tax return information.