Going Paperless With Your Money

Some of you are already fully paperless, some want to go paperless but don’t know where to start, and the rest are still managing your money with envelopes and folders.

It’s all about personal preference and what works for you, of course. But as the world moves firmly into a digital age, we see tactics like banks charging for paper statements that can actually cost you money if you don’t go paperless.

If you want to take the leap, or your existing system isn’t working quite right, here is the strategy I used to set up my own system and dump my filing cabinet for good.

Set up a Retrieval System

The first step in going paperless is ensuring that you capture all the information you would normally be getting in the mail. Statements are rarely delivered directly to your email, so it’s important to set time aside for retrieving them. Here’s what I do:

• Every one of my banks, credit cards, insurance providers, and billers emails me to let me know that a statement is ready. Because I use Gmail, I have these emails tagged as “Paperless” and leave them unread. (If you don’t use Gmail, you can just as easily set up a separate folder to move these emails into).
• Once a month, when I do my general financial review, I go through each email and download the corresponding statement. Marking the email “read” lets me know which statements I’ve completed.
• Once everything is downloaded, I move onto filing (next step).

Set up a Filing System

There is only one purpose of a filing system, and as a result only one rule I follow when setting one up–how easy will this be to find later? The answer is different for everyone, so it’s often necessary to experiment with what works for you. This is what I do:

• My financial statements and records have a folder to themselves.
• Within this folder, I have records organized in broad categories: banking, credit, loans, taxes, insurance, bills, etc.
• Within each folder, I use the name of the companies I deal with. For example, in banking I have a “Wachovia” folder and an “Ally” folder, as well as an archive for banks I dealt with previously.
• Everything within a specific folder is organized by date and a short descriptor. For example, a bank statement might be named “2011-05-03-Statement.pdf.” I could have done individual folders for specific types of documents, but I found that too much clicking around was required to find what I wanted.

Set up a Backup Solution

The last, and perhaps most important step is creating a way for your digital files to live on in case of failure. Paper files are prone to their own perils like theft and fire, but digital files especially can suffer from theft, hard drive failure, power spikes, accidental deletion, file corruption, and countless other problems.

The most immediate solution is an external hard drive, but that too shares many of the same dangers. I used to keep a second external hard drive “off site” in my safe deposit box, but now I just use online storage through Mozy. Given my rate of external hard drive failure, it costs about the same with a lot less hassle.

What’s Your Status?

Where do you stand with paperless filing? If you already have a system, how do you retrieve, file, and backup your own files? Do you have other steps in your system? Share your thoughts in the comments.

Photo by rosmary