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5 simple steps to paperless finances

Before you put that tax stuff away, here's an idea: It's time to go paperless.

By Stacy Johnson Mar 2, 2010 1:40PM

This post comes from partner site Money Talks News.


Spring cleaning is an American ritual that traditionally entails dusting places you normally don’t, cleaning out closets, and straightening up places you might have been letting go.


But what about your file cabinet? Before you put your tax paperwork away this year, add something to your spring cleaning list: Eliminate as much paper as possible in your life.


We’re now at a crossroads on the journey to a digital world. Electronic storage has become so inexpensive that you can now purchase a $10 flash drive big enough to store every piece of paper you’ll encounter during your lifetime. And yet many of us are still moving mountains of paper from our mailboxes to our file cabinets.


It’s time to stop and embrace the ability to eliminate much of the paper you’re now reading, storing, organizing and misplacing. In the process you’ll save time, money, stress and maybe a tree or two. Here’s how to go about it.


First, check out this 90-second news story we recently did for a few tips on becoming paperless, then meet me on the other side for more.

Let’s recap those tips with a bit more detail. Here are the five steps to paperless finances.


Step One: Know what to stow and what to throw. Which papers you should keep has already been, if you’ll pardon the pun, well-documented. For example, here’s an article by MSN Money that goes into great detail, and there are plenty of others like it. But don’t bother printing any of these articles and putting them in your file cabinet. The Internet is already storing them for you and all you have to do to retrieve them is either bookmark one or do a search for “how long to keep paperwork.”


Step Two: Start storing everything digitally. If you’re not receiving your bills online and doing your banking and investing online, start now. It’s faster, easier, cheaper and safer. Faster and easier because you can receive, review, retrieve, pay and digitally store bills and statements with a few mouse clicks. And if you organize them on your computer, you’ll probably also locate them faster should the need arise.

It’s cheaper because neither you nor those you deal with will need envelopes, stamps, file folders or cabinet space. And it’s safer because if you properly back up your digital files, they’ll never fade, get lost, feed a fire or float away in a flood. You'll never worry about lost mail, and your files will be available from anywhere there’s Internet access for as long as you choose to keep them.


So, if you’re not doing your banking or bill-paying online, start. Set up online banking and make it a goal to avoid receiving or paying any bills by snail mail. Do it one bill at a time if you want to start gradually, but work your way up until you develop a total digital solution that suits you. Check out that article above from MSN Money to see how long you need to keep certain paperwork, like investment confirmations or bank statements. Then, instead of getting this stuff in the mail and putting it in a file cabinet, request digital copies, create a folder on your computer, and save them there.


When you come home with a new owner’s manual, do a search and see if it’s available online. (Here’s one Web site that has owner’s manuals: Manuals Online.) If it’s online, download it and keep the file on your computer in a folder labeled “owner’s manuals.” If you get receipts you’ll need for your income taxes, scan those and store them in a folder called “2010 income taxes,” which you can then subdivide into folders that correspond to the deductions on your tax return. If you don’t know what those deductions are, look at a digital copy of a 1040 Schedule A and you’ll find a list of them. If you need a receipt for a warranty, scan it and put it in a folder on your computer labeled “receipts for warranties.”


You get the idea: Whenever you have a piece of paper in your hand, make it a habit to ask, “Do I need this?” If the answer is yes, see if it’s already being stored online and either bookmark it or download it. If it’s not already online, scan it and store it on your computer. And speaking of scanning, that brings us to our next step.


Step Three: Eliminate the paper you’re now storing. Go through your file cabinets and see if you’re keeping paper you can toss. If you are, toss it, but be careful to first shred anything that contains sensitive information. If you do need to keep it, scan it. As I mentioned in the video above, you can easily find an inexpensive scanner.

And if the thought of individually scanning all your old paperwork proves too daunting, here’s a suggestion: Don’t do it. Clean out your files by eliminating stuff you don’t need and keep the rest. Just resolve not to add to it by scanning everything going forward.


Of course, there are exceptions to every rule -- you can’t store everything as a digital file. The expert we interviewed for our news story advised keeping any paper with an original signature on it. I’d add to that things that have raised seals. The original papers you need to keep should be fairly obvious: wills, contracts, titles, deeds and the like. These documents should still be scanned, so you’ll have a backup copy, then stored in an ultra-safe place like a safe-deposit box.


Step Four: Back up, back up, back up. While converting paper into digital files is certainly more convenient than filing them in a cabinet, there is a risk to storing important information on a complicated, sensitive machine -- data loss. Almost everyone has suffered from a hard-drive crash at some point, and while losing photos from your last vacation may be a bummer, losing your tax receipts in the middle of an audit will be devastating.


How should you back up? Keeping another hard drive in your house with copies of your important data might seem like the ideal solution, but if your house burned down, you’d lose your computer and your backup. Better solution? Use an “off-site” backup service. A popular one you’ve probably seen advertised is Mozy, but there are others available that can be found fairly easily with a search for "online backup." And it doesn’t have to cost a lot. MozyHome gives you 2 GB of backup space for free, which should store the lives of most families, but if that’s not enough, you can always increase your storage for not much money.


Also keep in mind that your sensitive information is only as safe as your computer is. Always password protect your computer in case it gets stolen.


Step Five: Free organizing software. Now it’s time for the good stuff -- freebies! Here are some free software programs and Web sites that will help you get your stuff organized and keep it that way.
  • Evernote is a free document organization program available for both Mac and PC that keeps your data “in the cloud.” This means that everything you store in it is automatically backed up to their server online. Evernote also has versions of its software for the iPhone, BlackBerry, Palm Pre, Windows Mobile and Android phones, letting you access your documents anywhere, anytime.
  • Scribd is a free Web site where you can upload your important docs for safekeeping. This site is made for sharing documents with friends, so make sure anything you don’t want the whole world to see is marked as “private” when you upload it.
  • Know Your Stuff is a free program from the Insurance Information Institute that helps you create a home inventory -- worth its weight in gold in case of disaster.
  • Adobe Reader is important for viewing all those .pdf files you’ll soon be downloading, storing and creating.

Bottom line? One day in the not-too-distant future, the advice in this article will seem quaint. Because like it or not, paper records are going to follow vinyl records into oblivion. Digital is better, so digital will win out. If you’re not already on board, this spring cleaning/tax season is as good a time as any to start.


Related reading at Money Talks News:



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