Looking after your financial documents
There are many different types of financial documents that you will accumulate through your life, and as you get older and take out more financial products, the number is likely to grow and diversify. Financial documents can be very important, not just for tracking your spending, credit and income, but also to use as proof when applying for loans, correcting errors with your bank or reviewing your tax assessment with HM Revenue and Customs (HMRC).
Some of these documents will be on paper but increasingly, statements and bills are sent electronically. Online paperwork can save space, money and trees, but it can also create whole new problems when it comes to storing and protecting your documents. For example, the possibility that documents are stolen or lost, which can increase the chance of identity theft.
What financial documents do I need to keep and for how long?
Key documents include salary-related items like your payslips, P60s and P45s, which can be useful if you need to prove your income for tax or credit reasons. HMRC suggests keeping payslips for at least 22 months after the end of the tax year they were issued in. However, if possible, it could be useful to hang on to all your payslips, or at least your P60s, so that you have evidence of things like National Insurance contributions later in life.
Bank statements and utility bills do not have to be kept for any specific period of time, if you are not self-employed, but again it can be useful to keep these kinds of records for at least two years, if not longer. Even if you are not currently planning on taking out a loan or other financial product, if your lender asks for bank statements from the past year, it will be a lot easier to keep these documents to hand. Similarly, loan statements should be kept even after you have made all the repayments, so you have evidence in case of any disputes.
Insurance documentation should be kept until the policy expires, and you may even wish to hold on to old policies to compare terms, conditions and costs with your new agreements.
If you’re applying for a mortgage, the above documents become even more important. When applying, you’ll need to provide proof of income to your bank or building society so they can calculate how much you will be able to pay back. This includes your last three months of payslips, your most recent P60 and six months of bank statements. If you claim benefits or have any investments, you’ll also need to show documentation, to give lenders a full picture of your income.
How can I keep financial documents safe?
Both paper and electronic documents need to be kept safe, from loss, damage and theft. Financial documents can be highly valuable to criminals looking to commit identity theft, in particular bank statements and utility bills, which can be used as proof of identity or address. Lost or destroyed statements can also be a pain if you need to prove your income or resolve a dispute regarding a financial product.
Paper documents that you wish to keep should be stored somewhere secure, like a locked filing cabinet or even in a safe if you have one. Older documents, that you have decided not to keep, should be shredded before being thrown in the recycling or rubbish bin. Ripping a letter up is not always enough, as it can be pieced back together to reveal key information.
Electronic documents should also be locked away using secured passwords and encryption. If you store bank statements or bills in your email or on a cloud server, make sure to use a strong, random password for the account, and enable two-step verification where possible. If you store documents on a hard drive, make sure it is in a password-protected folder on a secure computer.
If you get rid of a computer or hard drive, make sure to transfer the files to somewhere secure and then wipe the drive to clear all the files. Just deleting the files is not always enough, as they can be retrieved with the right software. Specialist programs can be downloaded that will overwrite the old data, and there are also services that offer hard-drive ‘shredding’, that will physically destroy old computers and hard drives.
- Financial planning for parents
- How transferring pensions works
- Helping elderly parents manage their money
- Budgeting for school holidays
- New Year, new start to your finances
- How to avoid overspending on special occasions
- Financial Jargon Buster
- Getting Financial Help – The Best Online Resources
- Explaining the Different Types of Savings Accounts
- Understanding Payment Cards
- Money Saving Strategies – Tips on How to Save
- How to Budget Your Finances