I am the happy recipient of a paper shredder. I want to clean up. What do I keep and what becomes confetti?

Step back from the shredder and take a deep breath.

You’re not alone if you suffer from bulging file cabinets, and with identity theft at epidemic levels, expired paper documents probably represent the biggest threat to your personal financial health.

At least once a year, experts say, you should shred everything you don’t need. But before you fire up the machine, be aware some legal documents should be retained for at least six years – and it’s wise to keep others indefinitely.

For starters, gather copies of identification papers – including birth certificates, driver’s licenses, passports, visas, Social Security cards, voter registration cards and green cards – for all members of the family. Make copies and put them in a safe place.

“When it comes to personal-records-retention guidelines, there aren’t any hard-and-fast rules,” said Shred Nations, a Colorado-based commercial paper-shredding company.

The company recommends keeping the following indefinitely: adoption papers, birth certificates, passports, death certificates, divorce papers, custody agreements, receipts for the purchase of major assets or investments, property deeds, proof of loans that have been paid off, income-tax returns (supporting documentation may be discarded after six years), tax records related to the sale of a home and documents related to nondeductible contributions to an individual retirement account.

Here’s Shred Nations’ advice about the rest:

ATM receipts: Keep these until you balance your bank statement and then shred them.

Credit-card statements: Keep three months’ worth on hand.

Medical insurance: Keep premium statements, doctor bills, prescriptions, hospital bills and the like for five years.

Home insurance: Save them for 10 years.

Pay stubs: Many people save these, but this is not a good idea unless you’re planning to get a new mortgage, which usually requires a few months’ worth of pay stubs.

Home repairs: Keep the contract for 10 years in case you have problems with the workmanship.

I am 21 years old, recently graduated college and have my first full-time job. What is the best way to invest my money right now, so that I will be able to buy a home in the next four or five years?

Good for you for thinking ahead. Too many young people don’t get serious about financial planning until, well, they’re not so young anymore.

Unfortunately, time – not to mention timing – is not exactly on your side.

A four- to five-year horizon is not really long enough to justify much of an investment in stocks, said Jeffrey Kleintop, chief investment strategist at Philadelphia-based PNC Advisors.

And with bonds likely to offer only low- to mid-single-digit returns over the next several years, reaching your investment goals is probably going to depend more on your savings growth than on investment growth, he said.

“Your goal is tied to interest rates,” Kleintop said.

A good match would include so-called cash equivalents such as certificates of deposit, Treasury bills and money-market funds.

“Perhaps a mixture of limited stock-market exposure and some cash equivalents may be your best bet,” Kleintop said.

The precise percentages will depend on your risk tolerance and willingness to extend your horizon if stocks slide near the end of your timetable.

One other thing to keep in mind:

“As rates go up, home-price appreciation may slow, but the cost of borrowing will rise – so the amount of home you can afford will fall,” Kleintop said.

“The higher cost of borrowing may be more of a negative to home affordability than the impact on home prices is a benefit.”


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