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Which Records Should You Keep and Which Can You Ditch?
Your taxes are filed, your return is on it's way—and now you're left with a box full of bills, receipts and who knows what. Financial expert David Bach helps you purge what you don't need with an excerpt of his new book Start Over, Finish Rich. Read more by downloading your free copy of Chapter 2.
Financial records you don't need
Photo: Brand X Pictures/Thinkstock
The reason I made the FinishRich File Folder System so specific is that many of us keep too much information for way too long. (I'm guilty of this myself.) The fact is, except in cases involving fraud, the statute of limitations on income-tax returns is only three years, so the Internal Revenue Service does not expect you to hang on to tax records and receipts for any longer than that. The main exceptions to this are if you've underreported your income (in which case you should keep your records for six years) or have claimed a loss from worthless securities (seven years).

Obviously, you should keep records documenting the cost basis of your home and all your other taxable investments for as long as you own them. The same goes for the basic documents concerning your retirement accounts and insurance policies, not to mention all loans and mortgages.

But don't be shy about getting rid of old materials. Here's a list of items you should consider throwing away (or shredding if the documents contain personal information):

  • Outdated warranties
  • Outdated instruction manuals
  • Outdated wills or trusts (provided you created a new one)
  • Canceled insurance policies
  • Credit card statements for closed tax years
  • Canceled checks for closed tax years
  • Old brokerage statements for closed tax years (unless they have cost-basis information you might eventually need)
  • Old annual reports from stocks and/or mutual funds
  • Old investment newsletters (some people keep these things for years because they paid for them—let them go)
Organize your files in under an hour with Bach's file folder system

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    David Bach's File Folder System
    Financial expert David Bach helps you get your finances organized once and for all with an excerpt from his book Start Over, Finish Rich. Read more by downloading your free copy of Chapter 2.
    Organize your files.
    Photo: Jupiter Images
    Let's face it—organizing your finances can be a real chore. Every month, you get sent dozens of statements, bills, and other financial documents in the mail and online. It can be overwhelming. The good news is that there's a way to get organized that's amazingly easy and relatively painless—a system that allows you to find your bills and important documents quickly and without worry.

    I first developed my file folder system back in the 1990s, and it's one of the top things my readers thank me for. That's probably because it is one of the few things you can do in less than an hour at home to fix and secure your financial life. Many people—maybe you're one of them—waste literally hundreds and sometimes thousands of dollars a year paying late fees, interest fees, and penalty fees because they can't find their bills in a pile of other financial "stuff" and, as a result, miss their payment deadlines.

    Of course, times change and our needs change with them. So I have taken the Finish Rich File Folder system that I've described in my previous books and updated it for the current economic environment.

    What hasn't changed is that it is still simple and you can still set it up at home in less than an hour. Here's what you do: First, get yourself 15 or so hanging folders and a box of at least 50 file folders to put inside them. Then label the hanging folders as follows:

    The Finish Rich Tax File Folder System

    1. "Tax Returns." This hanging folder should contain four file folders, one for each of the last three years plus one for the current year. Mark the year on each folder's tab and put into it all of that year's important tax documents, such as W-2 forms, 1099s, receipts to support deductions or credits, and (most important) a copy of all the tax returns you filed for that year. Generally speaking, you don't need to keep tax records for more than three years, although some documents—such as records relating to a home purchase or sale, stock transactions, retirement accounts, and business or rental property—should be kept longer. I keep all my tax documents for at least seven years, but that's an individual decision.
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      Download a Chapter of Start Over, Finish Rich by David Bach
      Start Over, Finish Rich by David Bach
      Each month, David Bach will be offering a free download of a new chapter of his book Start Over, Finish Rich. Each chapter offers step-by-step instruction on topics designed to help you get your finances in order in 2010:
      • Get out of debt
      • Fix your credit
      • Rebuild your 401(k) plan
      • Take SMART risks
      • Make your financial recovery automatic
      • Rebuild with real estate
      • And more!
      Download "Step 1: Recommit to Wealth" PDF  

      Download "Step 2: Find Your Money" PDF  

      Download "Step 3: Deal with Your Credit Card Debt" PDF   

      Download "Step 4: Fix and Protect Your Credit Score" PDF    

      Download "Step 5: Rebuild Your Emergency Savings" PDF  
        
      NEW! Download "Step 6: Re-energize Your Retirement Plan" PDF  

      Instructions 
      If you're on a PC, right-click on the link above. Internet Explorer users, select "Save target as"; Firefox users select "Save link as." Select where you wish to save the file on your computer, and then click "Save."

      If you're on a Mac, Ctrl-click on the link below. Safari users, select "Download linked file as," Firefox users select "Save link as." Select where you wish to save the file on your computer, and then click "Save."

      Once the file has been saved, go to the location where you saved the file and open it to begin reading.

      Having Trouble? 
      You will need the free Adobe Acrobat Reader to see this file. Download Adobe here. 

      This book is copyrighted. You may view and download the file, but you may not copy the file or share or forward it to any other person. Used by permission. Excerpted from Start Over, Finish Rich by David Bach. Copyright © 2009 by David Bach. Excerpted by permission of Broadway Books, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. 

      Bach's tax advice: DIY tax filing vs. hiring a professional

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        6 Ways a Nonprofit Counselor Can Help You
        During Oprah's Debt Diet, our experts helped three families tackle their debt with a step-by-step plan to financial freedom. Not everyone can have a money expert move in—but if you're drowning in debt and are afraid you can't get out alone, David Bach says a nonprofit counselor may be the next best thing.
        Nonprofit credit counseling
        Photo: BananaStock/Thinkstock
        Four years ago one, of my closest friends, Bill, came to me to share he was more than $100,000 in credit card debt. Bill needed more then a Debt Diet—he needed professional nonprofit consumer counseling. Fortunately, that's exactly what he got, and last month Bill became officially debt-free! Bill's not alone. Each year, millions of Americans turn to nonprofit credit counseling to help them get out of credit card debt. When people turn to these organizations, they have, on average, more than $20,000 in credit card debt. With that said, you don't need to be this far in debt to get professional help. I'm an advocate of getting nonprofit credit card counseling if you feel you can't get out of debt yourself. If you're having trouble paying your bills on time, are only making minimum payments or have skyrocketed interest rates on your cards and can't make a dent in the debt, it may be time to get some professional help. The key, however, is to get "trustworthy, honest help" from a reputable nonprofit credit counselor. Let's take a look at what these organizations can do for you.

        1. Offer you a free debt counseling session

        In my experience of interviewing nonprofit organizations, the good ones will work with you for at least an hour to an hour and half to review your entire debt situation and overall financial position for free. If there is an up-front fee, it will be very small—less then $100. Before the counselor gets into the nuts and bolts of your situation, he will most likely start with a "holistic approach" to understand your situation better. He may ask you a question like "What brings you to us today?" This question helps to break the ice and, equally importantly, allows the counselor to really hear your story so he can coach you appropriately.

        2. Help you look closely at where your money really goes

        Once the counselor has asked you what brought you to the nonprofit, it's time to look specifically at your finances. He will look at what you earn and what your expenses are. Then, he will look closely at your debt, how much you have, what your interest rate is and what you are wasting in late fees and over-the-limit fees. After doing all this work with you, he be able to access if he believes you are in a financial position to get out of debt with their assistance, require a DMP (debt management plan) or need to consider bankruptcy.
        PAGE 1 of 3

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          The 10-Step Plan to Improve Your Credit Score
          Your credit score is like your financial GPA. In good times, it determines how much interest you will pay on any kind of loan, from credit cards to your mortgage. Today, because of the credit crisis and the recession, having a high score is more crucial than it has ever been. Financial expert David Bach has developed a 10-step action plan to get your score up quickly—and keep it there.
          Credit score
          Photo: Stockbyte/Thinkstock
          So let's get started. The simple truth is that raising your score isn't that hard if you know what to do. It just takes time. As I noted above, it's mainly a matter of understanding the factors that FICO weighs and then figuring out which of them you can change for the better. Over the years, I've coached literally thousands of people on fixing their credit scores, and based on that experience I've developed a 10-step action plan to get your score up quickly and keep it there. I promise you—regardless of where you are starting from, if you follow this plan, in six months your score will be higher than you thought possible.

          1. Get your credit report and check it for errors.
          There is only one place you can get a truly free copy of your credit report: www.annualcreditreport.com, a centralized service for consumers to request free annual credit reports run by the three nationwide consumer credit-reporting companies, Equifax, Experian, and TransUnion. You must do this first, because it's extremely likely that there are errors in your report. A 2004 survey by the National Association of State Public Interest Research Groups found that 79% of all credit reports contained incorrect information. There is no reason to believe that things have gotten any better since then. Once you get your report, go through it with a fine-tooth comb. If you find any damaging errors (for example, late payments that were actually paid on time or credit limits that are lower than they should be), get them corrected as quickly as possible. You can do this by sending the credit agency a certified letter that explains what information was inaccurate, including copies of documents (such as bank records or mortgage statements) that verify what you're saying, along with a copy of your credit report with the disputed information circled in red. Under the Fair Credit Reporting Act, both the credit-reporting agencies and the banks and merchants that provide them with data are required to correct inaccurate or incomplete information in your report when it's pointed out to them. (Occasionally, errors can help you, as when accounts you closed are listed as being open; don't feel obliged to correct these.) You can find sample correction letters on my website at www.finishrich.com/creditletters.

          2. Automate your bill paying so you never miss a deadline.
          Even if it's only a few days late, just one overdue payment—whether it's for your mortgage, a utility bill, an auto loan, a Visa account, or any of a hundred other credit obligations—can seriously damage your FICO score. FICO pays a lot of attention to whether you make a habit of missing due dates, so a series of late payments can really hurt your score. By the same token, a consistent record of on-time payments can improve it. Although FICO says it takes as much as two years of on-time payments to bump up your score, my experience is that if you pay all your bills on time for a year, your score will improve. This is why it is so important to set up the kind of automatic bill-payment plan I described in Step 3. If you haven't already done this, go back and reread that step and put the plan in place—it will protect your credit score and ultimately raise it.
          PAGE 1 of 3

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            7 Easy Ways to Find Hundreds of Dollars in Less Than an Hour
            Financial coach David Bach shares his simple strategies from his book, <I>Debt Free for Life</I>, that may help you "find the money"&mdash;money that you may already have but don't know about.
            State treasurers and other government agencies are currently holding more than $32 billion in unclaimed assets from 117 million accounts that their owners have either forgotten about or never knew they had.
            Magnifying glass
            I assume that sentence above about the $32 billion in unclaimed assets got your attention. Well, it's true. Billions of dollars in unclaimed assets are sitting in government coffers—and maybe some of it is yours. So let's take a look. Who knows—you may find some money that's just sitting out there somewhere, waiting for you. 

            1. Check the Federal Government's Savings Bond Database 
            According to the United States Treasury, more than $17 billion worth of Series E Savings Bonds have never been redeemed. These bonds were sold between 1941 and 1980, marketed by the government as a safe and patriotic way to invest. Maybe you got one as a gift. (I know I did—the dreaded "Grandma got you a savings bond" gift.) Apparently, a lot of recipients simply forgot about them.

            There are more than 55 million savings bonds that people own, so it's not that much of a stretch to imagine that at one point maybe you were given a savings bond that you forgot to cash. Well, let's go and find out. You can do this in minutes. First visit the Treasury Department's savings bonds website and navigate to a special page called Treasury Hunt®. Once you've reached the Treasury Hunt page, you'll find a big blue button two-thirds of the way down marked "Start Search." Click on it, type in your Social Security number, and you'll instantly be informed whether or not they are holding some bonds in your name! 

            If it turns out they are, you will need to fill out some forms to get your money back. Use form PDF 048 if your savings bonds were lost, stolen, or destroyed; form PDF 3062-4 if your bonds never got delivered. Both can be downloaded from the Treasury Hunt page.  Again, it's all free, and it can lead to found money!

            Next: Check the banks
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