Death in the family, illness, loss of a job, or divorce can take a great toll on our daily lives and finances. If tragedy strikes and you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.
How to Keep Accurate Records (And Why It’s Important)
Whether you are applying for a home loan, getting pre-approved, or selling a home, keeping accurate records is an important part of financial responsibility. Accurate records will help you provide evidence about a past event like a home purchase in case of emergency or you need proof of ownership.
Why Keep Accurate, Organized Records?
According to the IRA, keeping accurate, organized records is an important part of:
- Preparing financial statements
- Disputing claims or errors
- Showing lenders that you can make your payments
- Identifying and confirming your income sources
The best way to organize your records is by keeping them in their own separate files by category and then the year for easy access. For example:
- Health Records, which cover documents like insurance policies, bills, prescriptions, and life insurance.
- Financial Records, which cover documents like bank statement, taxes, and loans.
- Home/Property Records, which cover documents like mortgages, deeds, and property tax information.
When organizing your records, keep them in a safe, secure place like a lockable filing cabinet or fireproof safe. In cases of records that are difficult to replace, like titles and deeds, put them in a safety deposit box.
Make Sure Statements & Other Records Are Accurate
When you receive statements and other records, remember to go through them to make sure that the information presented there is accurate. If you find an error, talk to your financial advisor and the party is responsible for issuing the statement about getting it corrected. If you don’t, it will negatively affect you in the future if you wish to purchase a home.
Save Your Records
Keeping records is a critical part of making large purchases like a home or filing claims, among other financial decisions. You may have heard that you should keep records for up to seven years, which is good advice. However, different records require different periods of time until they can be safely destroyed. For example:
- Taxes, some credit card statements, and property records can be kept for up to seven years.
- If you have IRA contribution records, keep these records indefinitely to prove that you’ve paid taxes on the money.
- Bills like utilities can be shredded after one year, but bills for larger purchases like jewelry and electronics should be kept permanently in case of loss or damage.
- After you have sold a property, you should keep records relating to the property “until the period of limitations expires for the year in which you dispose of the property,” according to the IRS.
- Home inventories should be kept indefinitely and updated every six months.
Keep Backups Of Those Records
If you are not keen on disposing of old records but don’t have the room to store them, it is advised that you back them up to an electronic file or by making scans. By keeping backups of your records, you will have access to them in case the originals are lost.
Safely Disposing Of Records
When it is time to dispose of a record, it needs to be done correctly and safely. In doing so, you will be protecting your personal information from thieves:
- Paper records should be shredded or incinerated. If shredding, opt for shredders that produce “confetti”. These pieces are smaller and cannot be put back together like strip shredding .
- Digital records should be “sanitized” either by physically destroying the storage medium (like a CD), degaussing, or overwriting the data.
While more convenient to store, digital records are harder to destroy since hitting “delete” doesn’t actually destroy the information–there are backup files that can be dug out and recovered with file recovery programs. If you are unsure how to safely destroy digital records, consult a reputable IT professional.