The Four Ds
#3: Diminish
In 2004, the American Journal of Psychiatry published results of a study that said chronic hoarders—people who seem to save things with more passion than the rest of us—have decreased activity in the parts of the brain used for decision making and problem solving. In other words, there may be a clinical reason why you can't decide what to keep and what to get rid of. That's why you need rules. With clothing, the rule is: If you haven't worn something for two years, it goes. With bills and paperwork, the rules vary depending on what you're looking at. ATM receipts need to be kept only until you receive that month's bank statement and verify that the numbers are correct. Tax returns have to be kept for years and years.

Here's a list to keep you straight. Make a copy of it, then tape the list to the inside top of your file box.

Keep as long as you have the underlying asset (such as a house or a car):
  • Insurance policies
  • Receipts for important purchases like technology, art, antiques, rugs, jewelry (or anything else you may need a rider on your insurance policy to cover)
  • Receipts for renovations or other investments made in the property
  • Titles
  • Warranty papers
Keep forever in a safe or safe-deposit box; and keep a second copy, if possible, in your attorney's office or another safe location off-premises:
  • Adoption papers
  • Appraisals
  • Birth certificates
  • Citizenship papers
  • Custody agreements
  • Deeds
  • Divorce papers
  • Financial aid documents
  • List of credit card numbers, bank and brokerage statements, and insurance policies, and toll-free contact information
  • List of important contacts (lawyer, accountant, doctor, children, parents, etc.)
  • Military records
  • Powers of attorney (medical and financial)
  • Stock certificates
  • Wills/Living wills
  • Credit card solicitations
  • Marketing material included in bank and credit card statements
Throw out after ONE MONTH or when you reconcile with a bill or bank statement:
  • ATM receipts
  • Prospectuses and other information about investments you are considering making (if you're not going to read them, toss immediately)
  • Receipts for purchases (assuming you're keeping them or there's no warranty)
Throw out AFTER ONE YEAR or when end-of-year consolidated statements come in and you have filed the taxes for that year:
  • Bank statements
  • Brokerage statements
  • Cell phone, cable, telephone, and Internet statements (except when deducting for work-related expenses)
  • Credit card bills
  • Pay stubs
  • Social Security statements
  • Utility bills
Throw out AFTER SEVEN YEARS (when no longer needed for tax purposes):
  • Child-care records
  • Flexible spending account documentation
  • 401(k) and other retirement-plan year-end statements
  • IRA contributions
  • Purchase records for investments
  • Records of charitable donations
  • Records on houses you've sold
  • Tax returns and backup documentation
What should you do with the stuff you toss? Shred it! A crosscut shredder for at-home use can burn through five sheets of paper at a time. Heavy-duty machines can even cut through old credit cards. You can buy a decent machine for about $100 to $150. And if there's not too much paper to go through, you can tear it up yourself!

Next: #4 Diligence
Reprinted from Make Money, Not Excuses by Jean Chatzky with permission from Crown Business, a division of Random House, Inc. Copyright © 2006 by Jean Chatzky.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


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