One of the most insidious pieces of paper that regularly litters my clients’ homes is the receipt. Alone it may look small and harmless, but it can be powerful in its importance or unimportance. Let me explain the latter.
One piece of tax advice I hear is “keep everything!” Really? This 2004 receipt for “Beggin Strips” from Petco is going to help me save money on taxes? Unless you run a kennel, this piece of paper is probably not going to help you.
Of course I’m going to advise that you check with your accountant first (even though he or she may be the one who advised you to “keep everything!”), but the more receipts you keep, the more likely you are to lose the ones that really matter. Either the important ones get lost in the excess or the excess gives you a false sense of security.
So how do you know what to keep? Here’s a starter. As with all items that clutter your home, simply ask “why am I keeping this?” A receipt alone may be kept for several different reasons. Here are the best three I have found:
1. Tax purposes.
This is by far the most important reason. I keep a simple file jacket out, subdivided by “credit” and “cash.” The credit receipts may be redundant because the expenses appear on my credit card statements, but it is helpful to have the receipts for cash payments isolated.
2. Items to possibly return.
It’s a good idea to keep receipts for items that you may want to return, but if they have nothing to do with tax purposes, keep them in a separate folder.
3. To demonstrate insurance value.
It may be helpful to arrive at an accurate figure to insure your property if you keep receipts for your more valuable purchases. Keep these in a folder with your insurance policy.
Maybe you’re the diligent type who is good at seeing if your grocery receipts stay within your monthly budget, but if that’s not you, don’t hold on to these receipts in the hopes that you will suddenly become the diligent type. Let them go so that you can focus on what you really do care about.
This has been my approach for years and an important receipt has never gone missing, but seriously, see what your accountant thinks, starting with the receipt for the “Beggin Strips!”