How Long Should You Keep Receipts and Bills

Receipts and bills are commonly issued by service and utility providers as an acknowledgement towards payment of dues and charges by you. Some recurring bills and receipts go on piling up in heaps every month. Many people are actually confused with how long they need to keep these bills and receipts and so, they go on retaining them for years together. Suddenly they realize that, the receipt pile is occupying a major part of their drawer or filing cabinet. This space could have otherwise been used for storing other documents. Well, my article will help you deal with this very problem. Read on…

Valid Duration of Receipts and Bills

Gas and Electricity Bills
These documents make for a good proof of payment as well as proof of address. If there are any kinds of disputes pertaining to these bills, they ideally get solved in less than a year’s time. However, I suggest that these bills should be retained by you for not more than 2 years at a time.

Credit Card Bills
Credit card payment bills and receipts can usually be disposed off within a period of 50 days to 3 years time. These bills are important if you can expect a rebate on the bills from your organization in the next few years. Make sure to keep a copy of the payment check along with the receipt.

Bills for Purchases
There are numerous number of purchases that you make throughout the year. E.g. jewelry, home appliances, cars, etc. As far as vehicles are concerned, these receipts clearly state the purchase value and therefore can be of use at the time of depreciating the asset. For items like jewelry, such bills are crucially important in case your jewelry gets stolen. They are essential for submitting jewelry valuation report to insurance companies. I suggest that you retain these bills along with the guarantee or warranty cards for as long as you hold these assets in your possession.

Insurance Premium Payment Receipts
These receipts are one of the most crucial documents of your investment portfolio. Ideally, you need to keep these receipts and copies of payment checks permanently. On rare occasions, when your policy lapses or expires, retain the papers for another couple of years just in case you can revive the policy.

Rent Receipts and Home Purchase Documents
All payment receipts received by you when purchasing a new house should be retained permanently. These documents act as proof of payment and ownership of your house. If however, you happen to have a rented apartment, you need to maintain the rent receipts along with your rental agreement for maximum of 6 years. Maintain your purchase or sale agreements and apartment rental agreements permanently.

IRA Receipts
IRA stands for Individual Retirement Accounts. Any receipt pertaining to these contributions should be maintained by you permanently.

Tax Receipts
The Internal Revenue Services (IRS) usually hold audits for short tax payments within a span of three years from the actual payment year. Similarly, the IRS authorities might check your tax returns filing within a span of five to six years on suspected underreporting of your annual income. In such a case, it is ideal to maintain your tax payment receipts along with a copy of your tax returns for a period of at least 6 years.

Home Loan Receipts
These receipts are ideally to be maintained permanently along with your bank loan confirmation document and house purchase agreement.

Simplifying the Maintenance Process

Most of you realize the importance of these receipts and bills and yet view their maintenance as time-consuming and boring activity. Here are few simple ways to keep your filing cabinet in order.

– Yes! Reserving a cabinet or a specific drawer for filing purpose is essential. It helps you to keep a track of your important files all the time. In case of any emergencies like a fire, you might run to this cabinet and just pick up all the files and folders in one shot and carry them away to a safe place.
– If you have never done this maintenance ever before, then segregate your pile of receipts and bills as per their nature. E.g. all credit card receipts should be stacked together and same goes for other receipts too. Now segregate these receipts chronologically. Pin up receipts for a particular year along with copies of every payment check.
– Buy some piano-styled folders with multiple compartments that go for different types of bills. Now place the segregated bills in separate sections as per their nature and tag the compartments appropriately. E.g. in a folder earmarked for year 2010, use one compartment just for credit card bills and the compartment next to it for utility bills.
– Make separate files for major assets like houses or vehicles. Place all documents pertaining to their purchases and consequent payment like rent receipts in their chronological order.
– Try to retain soft copies of certain important documents like tax return receipts and payment checks before you destroy them.

The above suggestions will not only help you put your documents in order, but will also help you recover them when they are wanted urgently. You might have to take time off from your schedule once in a while to place fresh receipts in these files whenever you get them. Also, make sure to check and clear your files annually for those documents which are not required to be maintained anymore. Sounds easy isn’t it?

How to Keep Track of Your Money

Before we take a look at few ways to keep track of your money, here is a simple test. Ask yourself these questions, and answer with a ‘yes’ or a ‘no’.

– Do I owe anyone money?
– Do I borrow money too often?
– Am I usually late to pay my bills?
– Have I put off doing something that I actually need to get done but can’t because I can’t afford it?
– Do I run out of money before my next paycheck arrives?

If you answered most of the above questions with a ‘Yes’, there is no other way to break it to you but to say – you need help, friend! It is not everybody’s cup of tea to manage their personal finances. However, the good news is, you can learn to do it pretty soon and quite effectively too. The following tips on how to keep track of your money are going to help you save money. It is never a good idea to live paycheck to paycheck; so if you don’t want to do that, follow the tips given below and start keeping a tab on your money!

Ways to Keep Track of Your Money

Wallet
Know the exact contents of your wallet. That does not mean you should keep track of every single penny that you put in or remove from your wallet. But it always helps to know how much money you have in your wallet. It even saves you from embarrassment – what if you were to have coffee with a nice girl in a nice cafe and you discovered you had no money left in your wallet? I wouldn’t want to be the girl with you! (Just kidding… I hope that never happens to you.)

Tip: Check in the morning before you leave the house how much money you have in your wallet. Even if you find some of it missing, you have only a day’s expenses to cross-check and trace back your missing money.

Expenses
It is best to keep track of your expenses to know exactly how much money you spend and on what. Many a time it so happens that we do not remember how much money we spent. We buy a box of liquor chocolates and forget we bought it. We pick up a bottle of wine on our way to someone’s house and forget we did. And then we rack our brains trying to remember where it is that the money was spent! So keep a track of your expenses. You can keep a record in a small pocket diary. If you want to be all pro, you can do the same on an iPad!

Tip: Do this daily (at the end of the day, before you hit the sack) and you won’t even have to keep a diary! It is not important to actually ‘write’ down all your expenses; even a mental check can suffice, as long as you are absolutely sure.

Credit
This is how credit cards work (in the simplest, crudest terms) – they (credit union) give you money to use for free. They give you a time limit within which you have to return the money. But if you fail to return it in that time, they charge you an interest such that you eventually end up returning a lot more than you borrowed! Now the problem is, somewhere we have this psychological block in our heads – credit card is somebody else’s money, so even if I overspend, ‘my’ money is still intact. So we tend to overspend. But that is so wrong, for we all know that ultimately we have to pay the credit card bill from our own money. Plus credit card bills are always unbelievable. We take one look at the bill, and we are like ‘Damn! When did I spend that much money?’

Tip: Switch to using an ATM card or a debit card. That way, you would think twice before spending, as it would be ‘your’ money. Also all your transactions will show in your monthly bank account statement. It makes keeping a track easier.

Budget
Set yourself a budget and do not spend outside the budget. If you do, make sure to keep a track of what you spent the extra money on. Did you indulge in a shopping spree? Did you lend anyone money? Were you hit by some unexpected expenses? Medicine? Dinner? Trip to somewhere? Keeping track of your money when you are out on a small trip, holiday or vacation becomes almost impossible. Everybody is in the mood to spend. It is essential you set yourself a budget to keep track in such cases.

Tip: Keep a comfortable margin. Too low a budget can make it seem like you are overspending all the time, when actually you are not. It can bog you down! Take into account all your monthly expenses before setting a budget.

Account
Monitor your bank account vigilantly. It is the world of e-banking, so make sure you subscribe for an electronic monthly statement of your bank account, and make sure you actually go through the statement when it arrives and check for any transactions that seem fishy or unaccountable. I do hope this never happens to you, but a possibility of theft cannot be overruled. Credit card scams are not something unheard of. A lot of people have a lot of reasons (though wrong ones) to tamper with people’s bank accounts. It is better to be careful than sorry!

Tip: Train yourself to read through the bank statement carefully. Do not simply throw it in the trash can. It hardly takes a few minutes. Also report any unusual transactions immediately, without further ado.

So those were some personal finance tips that will help you keep track of your money. Train yourself to deal with money responsibly. You can inculcate responsibility in your children right from their tender years, so that they learn to use money carefully from an early age. Everything in life is not about money, yes. But many important things are – food, clothing, shelter, medical help, for starters. So it is always a good idea to save and invest. Hope the above tricks and tips help you out. Cheers!