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I am trying to de-clutter my house. My husband and I have years of financial records —  credit card statements, phone bills, electric, you name it! And we aren't sure what we can safely get rid of. What do we need to keep and for how long? What can be tossed?
-- Elana, Washington, DC

Household record-keeping seems to come in two basic styles. One follows the logic that you only need to keep the most important stuff, and then throw the rest away. The other has trouble defining “important stuff” — and keeps everything. The problem with the latter style is that saving a piece of paper (or computer file) only works if you can find it when you need it. If your file system consists of one big box with everything kept forever, you may as well throw it all away because you’ll never find anything.

So the first step for any system is to identify what’s important. Start with obvious things: birth and death certificates, marriage license, wills, deed to the house — anything that would be costly or time consuming to replace. For the really important documents, like your will or birth certificate, you may want to spring for a safe deposit box or a fireproof storage box at home. These you’ll keep forever.

A runner up in this category would be documents you need to keep indefinitely, but which you’ll probably throw out eventually: you don’t need to keep the lease on the apartment you moved out of in 1993 or the title to the car that has long since died and gone car heaven. Receipts for big purchases like appliances and electronic devices go in here in case you need it for a warranty of insurance claim. Include a list of all your credit cards, with phone numbers to call for replacements, in case your wallet is lost or stolen. Since you can’t know today how long you’ll need these documents, call this the “indefinite hold” category. Go through it once a year and thin out what you no longer need.

The next step is a little harder: what about all those receipts, checks, phone bills, mutual fund statements, warranty cards, tax returns, pay stubs, mortgage receipts, deposit slips, and other pieces of paper that someday, maybe, you might need but aren’t even entirely sure why. When it doubt, it’s easier to hang onto it than risk throwing it out and later wishing you hadn’t.

Which works for awhile. But after a few years, the “when in doubt, keep it” style of record-keeping creates a pile of paper that’s unmanageable. So your next step is to identify the categories you need to save, set up files or boxes to put them in, and throw the rest away. Once you get the system started, don’t let new piles take root: sort and file the new stuff as it comes in. Then, once a year, slice off the oldest year’s worth.

If you set up a new folder each year (which makes this a great time to do this) you can just pitch the oldest file when you start a new one. (Some people who have a hard time letting go like to “pitch” the hold files in dead storage like the attic.)

Now comes the hardest part: how long to keep "active" records. For basic personal financial statements (checking statement, deposit slips, canceled checks, credit card statements) you probably want to hang onto for at least three years. The more you use checks and a single credit card for all transactions, the fewer documents you’ll need to track your spending. And if you get a summary statement at the end of the year (mortgage payments, your W-4 for paychecks) toss the individual items and save the summary.

Tax related items (including canceled checks for tax-deductible expenses) should get at least a three-year hold — that’s how long the IRS can go back in a routine audit. You may want to keep returns, and supporting documents, for six years if you had any unusual transactions or a big change in your income. The tax man gets up to six years to challenge a return if you failed to report more than 25 percent of your gross income.  If the IRS suspects fraud, though, all bets are off. And there’s no time limit if you failed to file a return.

Investment statements and receipts may need a separate, longer-term category. If you have investment with a big gain, you’ll need to know what you paid for it when you sell it and have to pay capital gains tax. Same goes for receipts for any home improvements: you’re going to deduct those from the capital gain when you sell the house. So you may need a “capital gain” folder that goes in the “indefinite hold” category

If you really want to cut down on paper piles, check into online statements that you can store on your computer (backed up on a disk, of course.) More companies are moving to electronic recordkeeping to save money on their end, and printouts of electronic documents are usually as good as the original paper version. With a good personal finance software package, you can also budget, track investments and handle basic financial planning like saving for a college fund or retirement.

If you decide to go with electronic records, don’t forget to destroy your old records when you get a new computer. (Some people suggest removing the hard drive and destroying it, which may seem extreme — until you’ve been hit by the identity thieves.)

And no matter what system you devise, you can’t anticipate every future contingency. Many years ago, we moved from a state that levies property taxes on cars and then moved back over a decade later, only to find that the state had never taken our car off the tax rolls. In order to register again, we had to either pay 10 years worth of taxes or prove that we’d moved away 10 years earlier.

Fortunately, we were still using the everything-in-one-box-forever file system. So a 10-year-old gas bill with an out-of-state address was suddenly worth hundreds of dollars.

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