MoneyCounts : A Financial Literacy Series

1. Financial Clutter MoneyCounts: A Financial Literacy Series 11-A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214

2. Description • Financial clutter may not be visible. It could be a multitude of unnecessary bank accounts, a wallet filled with credit cards, or an outdated insurance policy. • Financial clutter can negatively impact your financial health.  • Fortunately, financial clutter can be tidied up to end the chaos so that you have a pristine financial plan.

3. Learning Outcome • Identify financial clutter • Understand the impact of clutter on your financial health • Understand how to get organized • Understand how to use budgeting and tax forms as a tool to clean financial clutter

4. Financial Clutter CHAOS ORGANIZE OR

5. Why clean clutter? Take control of your finances/budget Simplify financial record keeping for year-end tax Practice financial literacy skills Reduce stress and save time in the long run Spring cleaning can clear clutter in your personal financial life, just like you do for your closets and garage!

6. Identify clutter! You can’t clean financial clutter if you don’t know what and where it is! • Make a financial inventory list • Collect financial papers from all sources: • Around the house, in the car, shoe boxes, etc.

7. Sort first! Sort financial records according to categories • Monthly bills, pay stubs, bank statements • Tax forms • Retirement and investment documents • Warranties and user manuals • Policies and deeds • Permanent records (birth certificate, passport, will, marriage license, etc)

8. Let’s clean! Buy a “cross shredder” and a large pizza! • If you can get a copy of a document online for free, you do not need to keep it.  Cross shred it! • Most transactions are now electronic and digital, organize online files as needed

9. What to keep and for how long? PAPER DOCUMENTS 7 Years 1 Year • Satisfied loans • Student loan records • Paycheck stubs • Utility bills • Canceled checks • Bank statements • Quarterly investment statements 3 Years • Income tax returns • Medical bills • Sales records (home, stock) • Documents for tax returns • Annual investment statements

10. Student loan documents If you are a student and have federal student loans, what do you need to keep? • The fact that the Department of Education or Servicer has your student loan on file on NSLDS does not mean you should not keep your own copies of those documents.

11. Life cycle of records Permanent records Active records Temporary records

12. Permanent records Marriage & divorce licenses, separation agreements Social Security cards Birth & death certificates Wills, living wills, & advanced medical directives Trusts, estate documents, power of attorney Deeds, Records of paid mortgages Tax returns • You may want to keep your tax returns indefinitely. The IRS destroys original 1040s after three years, but you and your heirs may need information from the returns at some point in the future.

13. Active records Insurance documents Property records Stock certificates Contracts Records of pensions and retirement plans Home improvement records Property tax records disputed bills Stock records • Hold for at least three years after the due date for the tax return that includes the income or loss on the asset when it’s sold. • Keep until the dispute is resolved. • Property records include original settlement statement from when you purchased the home, as it shows closing costs and settlement fees paid. These may be added to the cost basis calculation when you go to sell your home. • Homeowner’s insurance and auto insurance policies until new renewal arrives, then throw out.

14. Temporary records Receipts to support billing/monthly statements Receipts saved for budgeting purposes Charges on credit cards Grocery receipts Charges on debit cards Personal purchases ATM withdrawals Miscellaneous receipts

15. Which guide to follow? Tax filing documents Budget

16. for cleaning financial clutter Budget checklist items Saving & investments Housing Utilities & household Personal and family care Medical Transportation & entertainment Pensions and annuities Debts

17. Using budget items as a guide

18. for Tax forms Using tax forms as a guide Income and interest earned Adjustment to income Taxes and credits Medical and dental expenses Gifts to charity Mortgage interest Casualty and theft losses

19. Which financial records to review and how often? • W4 • Insurance at work • Investments and brokerage accounts • Retirement and pension accounts • Free credit card report • Insurance • Beneficiaries • Personal information • Wills and trusts accounts • Amortization schedule

20. Strategies for success Purge & merge In a safe place Financial emergency kit Clean wallet to prevent from identity theft

21. Comments and questions MoneyCounts: A Financial Literacy Series 11A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214