Another year is about to come to a close. The markets showed quite the gyrations in 2015 and are so close to even for the year at this writing that I can't accurately predict if we'll be up or down once the ball drops on New Year's Eve. I don't want to address the market too much in this last newsletter of 2015 - mostly because there is nothing really to discuss. Since the correction in August the market crawled back to about even, and is now day by day going slightly above or slightly below that mark. The Fed will be making a decision about interest rates at its meetings mid-month -but in order to get this article out to you far enough before Christmas that you might read it, I need to write it before we know what happens. That means I already have my article for January - what the Fed did and why and what it means? It practically writes itself. So what to write about this month? Turns out a personal event brought up a subject that I've spoken with many of you about in the past but perhaps have never put in a newsletter article - until now.
My grandmother, Muriel Leeds, passed away last month at the age of 87. As her trustee and executor of her estate I have a good amount of work ahead of me - but with my help her and my late Grandfather had set up the proper estate planning documents; wills, trusts, etc. that will help make that work a lot easier. All that planning did not in any way prepare us for the pile of financial paperwork that is littering file cabinets, dining room buffet table drawers, storage boxes and closets all over her house. My grandparents lived in the same house since 1951, and while we haven't looked through everything, I believe every paid bill receipt, every check log, every bank statement, every cancelled check and every tax return for the last 64 years is still in that house. Unfortunately, while I'm sure my grandmother could have found anything at the drop of a hat - she was always sharp as a tack - there is very little organization to these documents other than older ones are toward the back of the drawer or bottom of the pile. I'm sure 99.9% of this stuff can be disposed of - but we're going to need to make sure the other 0.1% is set aside before we get rid of the rest. Don't do this! There is never going to be a time you need a copy of your August 1991 phone bill!
When it comes to bill receipts, you only need to keep those until you get your bank statements showing those bills have been paid. The bank statement with the cancelled check images are much better proof you've paid your bill than a receipt you wrote "paid" on. Those same bank statements only need to be kept for one year. As you get your statement you should be throwing out (but not actually throwing out - I'll get to that in a minute) the statement from that month last year. When it comes to investment statements the same rules apply - I usually tell my clients to keep each month or quarter statement until the end of year one comes in then keep just that statement. You don't need to keep your statements for more than one year (and if you are our client I can get you a statement for any month going back to 2002.) I know some people like to track their own year to year progress - if that's the case you can always just keep the summary page for the previous years, cutting down on the clutter.
Then there are the things you should keep a little longer. Tax returns should be kept for the last seven years, so right now everybody reading this should have disposed of their 2007 tax returns and those of all previous years. Things like Estate Planning Documents (Wills, Trusts etc.,) Life Insurance Policies, Marriage and Birth Certificates and Military Records need to be kept pretty much forever - which also means they should be somewhere secure, like a fireproof safe or a safety deposit box at a bank. If you are a client of ours and want to make things doubly secure, we would be happy to scan and keep with your other electronic files, copies of any of these documents. Many of them, like the Estate Planning Documents, we may already have.
So how do you dispose of these purged items once you've done your end of year clean out? Obviously most of these things should be shredded not simply thrown in the trash - although if you have a wood stove or other way to burn them that's another valid method - Global Warming contributions aside. If you own a shredder that's great, but in our experience the reasonably priced shredders don't seem to last very long. What we do at Keeling Financial is have a shredding service come in at least twice a year and get rid of all our documents in one swoop. These companies are bonded, insured etc. and can throw documents into machines that are practically wood chippers; box, paperclips, rubber bands and all. If you don't have enough to warrant paying a shredding service to come to your house, most of the office stores; Staples, FedEx, UPS etc. will take your boxes of documents and shred them for you at a reasonable cost.
On that same note, there's another thing you can do to make it easier for your heirs - I call it the doomsday file. The doomsday file is a file folder that stands out from everything else in your file cabinet, or desk drawer. Buy one that is neon green, hunter orange or some other noticeable color. In that file put the contact information for everybody your heirs will need to know about when you pass; your attorney, your financial advisor, your accountant, the general manager of your Condo complex in Florida, the tenants of your rentals, the funeral home where you prepaid your expenses, the life insurance agent who handles your policy, etc. In this way you don't have to disclose everything you have during your life, but your heirs don't miss out on anything once you pass away either. Then all you have to tell your heirs is, "when the time comes, just go to the bright pink Hello Kitty file folder in the upstairs desk and everything you need is in there."
The clutter in our lives doesn't just take up space and make organization difficult - it can also cost you money and your family money. If they can't find that stock certificate and your money gets escheated to the State, yes maybe they'll find your name in the paper and get the value of that asset someday in the future if you're lucky - but State Treasurers don't pay interest on escheated assets - and your heirs might be unlucky and never discover that investment. This is also another reason to consolidate your assets as much as possible into as few accounts as you can.
I hope this article gave you some good guidelines of how to declutter your financial life. I must admit, I don't practice what I preach in this area very well - especially when it comes to old paid bills. But after my recent experience I'm going to try and turn over a new leaf. All of us at Keeling Financial Strategies; Bob, Lynn, Beth, Maura and I would like to wish everyone a very Happy Holidays. We look forward to working with our current clients in 2016 and working with the rest of you very soon.
