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The Best Way To Store Financial Documents

by Jonathan on February 7, 2011 · 1 comment

I’m not sure about you, but this is one area that I have been in need of improving throughout the beginning years of my financial life. Way back in high school, I bought a little accordion style folder that I intended to use to store every piece of pertinent financial information I collected throughout the years. Only 2-3 years in, and it was quickly filling up! Not only was it filling up, it was completely disorganized, hard to transport, and even harder to search through in case I needed any information. In addition to this, it has hogged a lot of space in my closet, and when it filled up, I just started keeping stuff on my computer desk. As you can see, this is not a great solution, and I’ve only begun my financial adventures. Sure, I could expand into larger filing cabinets, but this only solves the problem of not having enough filing space. It would be harder to transport, would take up even more space in our place, and wouldn’t be any easier to search through.

Go Digital

Some of you may have figured it out long ago, but the best way to store documents is by creating digital copies. There are risks involved in going digital, which I’ll outline, but believe me, the benefits far outweigh the risks, especially when steps are taken to mitigate those risks.

Risks

Data Loss

The single greatest risk to storing documents digitally is the risk you take of losing your documents. Hard drives fail all the time, so how do you minimize the risk? It’s simple. Back up your documents to AT LEAST two hard drives, preferably three. If one disk fails, you always have the others.

Another solution, to minimize the risk of a disk failing, is to purchase a couple of SSD drives. These hard drives don’t have any moving parts, and so have a much lower risk of failing. Plus they are a little faster, but this shouldn’t be the reason you purchase them, as the difference is minimal for our purposes.

Another way to minimize the risk of having a drive fail on you, is to use external hard drives, and unplug them whenever you aren’t using any of the documents. Hard drives are rated at a certain number of hours that the drive can be run, and so not leaving the drive running all the time, will extend it’s life. There is talk that unplugging and plugging in hard drives all the time, will reduce it’s life, but the wear this places on a drive is minimal compared to leaving it running all the time. Also, unplugging your drives, when not in use, will minimize the risk of someone stealing your data.

Hacked Data

Another risk of having everything stored on your computer comes from computer hackers. Believe it or not, it’s very possible to get access to everything on your machine. I’ve long believed in the hacker belief, that anything connected to the web, has a way in. Here are two ways that I minimize this risk.

As stated in the last section, keep your external drive unplugged when you aren’t using it. If you have it plugged in only 10% of the time you are using your computer, this reduces the chances of someone getting into your stuff by 90%. If it’s not connected, they can’t get it, simple as that.

The other way to increase security is to encrypt your external hard drive. Maximum PC has an excellent article on the topic.

Benefits

I strongly believe that these benefits outweigh the risks involved in digitizing all your documents. All risks can be minimized.

Organization

This is the best reason to switch to the digital world in my opinion. You can organize everything, exactly how you want it organized. You can create as many folders and subfolders as you need, and you can name them whatever you want. On top of that, you can use your operating system’s built in search functionality to look for whatever document you want, as long as you name it in a descriptive way.

More Space

With the size of modern hard drives now sitting at and beyond 2 TB, you have near unlimited space to store everything you need. With a filing cabinet system, you are extremely limited, on top of having to put up with an extreme loss of space in your house or apartment.

Portability

When you store documents digitally, you can take them with you when you travel. Again, there are risks involved in this, such as theft, and downright losing of the drive, but if you are responsible and careful, this shouldn’t be an issue, especially if you have the drive encrypted.

How Do You Store Them?

For anyone who doesn’t know how to actually go about storing physical documents digitally, I can tell you from first hand experience it’s very easy.

Here’s what you need:

1. A scanner or all-in-one printer. This can be bought on Amazon for less than $50.
2. PDF merging software. The reason I use this, is to merge documents that are made up of more than sheet into one PDF. This tremendously enhances the amount of organization you get out of storing documents digitally. I use pdfsam, which is a free program that works great for what I need. You can download it here.
3. At least two external hard drives. For most people, a couple 100 GB drive should work just fine, and can be purchased cheaply from Newegg.com.

Using just these two tools, and a couple of external hard drives, you can back up your entire document collection, and still have plenty of space to spare, both on your computer, and in your home. I’ve been working on backing up the last few years’ worth of documents over the past week, and am over half way through them, but I’m still sitting at less than 200 megs worth of storage space used up. Definitely an improvement over having papers laying around!

Photos by waferboard and LaMenta.

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About the author

Jonathan wrote 103 articles on this blog.

Jonathan is the founder and primary writer at CentsToShare. He enjoys reading above all else, but also gardening, building, eating healthy food and being self-reliant. Living a happy, stress-free life is possible, but it must be sought after, and not taken for granted. If you like the site, please let me know in the comments or through email - centstoshare@gmail.com. Thanks!

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