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How To Organize Electronic Financial Documents

Posted By Jim On 04/05/2010 @ 7:01 am In Personal Finance | 30 Comments

It’s always tricky remembering how long I should keep financial documents [3] so recently I began cheating by electronically scanning all my documents to my hard drive. I was able to save all the documents I really didn’t need, but was apprehensive about shredding forever, and created electronic backups for the documents I knew I should keep. It was the best of both worlds.

The end result, though, was a collection of poorly organized files. To help me create a system, I began reading online. When the NY Times Bucks blog talked to Alicia Rockmore [4], co-founder of Buttoned Up [5], she recommended a year-based file system.

“Have one file for everything that is tax- or finance-related per year,” she said. Then, download electronic records available online to the files and scan in paper copies of other documents as well.

While the advice was a good start, I thought it lacked depth, which may have been intentional. The best filing system is your filing system, one tailored to your needs and tendencies. If you prefer a year-based system, use a year-based system. If it’s easier for you to find and file documents based on asset, you’ll want an asset based system.

Filing System

I started with a filing system that mirrored our paper system and it soon evolved to something a little more robust. For our electronic files, we categorize them based on the asset the documents are related to. For each asset, we then use a year-based folder system for regularly scheduled documents, like statements, and put multi-year documents in the root folder.

When I need a document, my mind immediately thinks about what that asset the document “belongs” to. If I need my homeowner’s insurance, I don’t think “insurance document,” I think “my house’s insurance.” So in that case it makes sense for me to put the policy in with the other documents for the house, like mortgage statements and settlement papers. If you think “insurance document,” then you should put it with your insurance documents, such as life insurance and auto insurance. Our auto insurance is with our car and life insurance would be with Personal (or maybe legal, I suppose we will decide when we get there).

File Folder System

For example, here is the file structure for the top level directory (labeled Personal Documents):

  • 2003 Toyota Celica
  • 2005 Honda Civic
  • [Address] Home
    • Archive
    • 1st Mortgage
    • 2nd Mortgage
    • Property Taxes
    • Homeowner’s Insurance
    • Settlement Documents
  • Archive
  • Financial
    • Archive
    • Bank Statements
    • Broker Statements
    • Credit Cards
    • Credit Reports
  • Legal
  • Medical
  • Personal
  • Rebates
  • Taxes (year-based)

Many of our folders are pretty sparse. Our legal folder contains two documents, a red light camera ticket and a speeding ticket in North Carolina, and our Medical files just has scans of some recent blood work. Rebates is really a reminder system, containing pending rebates (it’s empty now), while Personal is a catch-all folder for things with no other convenient label, like scans of our passports and driver’s licenses. As we acquire more documents and our financial situation gets more complicated, I’m sure this system will evolve to meet our needs.

Backups & Encryption

Our electronic documents are stored locally on my PC as well as backed up on a portable hard drive and a network attached storage device. Since this information would be bad news in the wrong hands, both are encrypted with TrueCrypt [6], a freeware application that encrypts my data with 14-round 256-bit AES encryption. It also has steganographic features too, meaning it takes your data and hides it after encryption so it looks like random data, so that people don’t even know it’s there. I haven’t implemented that yet but I’ll be taking a look. 256-bit AES is strong enough that it can be used to protect classified information up to the Top Secret level, I think that’ll suffice for now.

If you’ve done any electronic document storage, do you have any tips or tricks? How do you organize your electronic financial documents?

(Photo: mucio [7])


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/how-to-organize-electronic-financial-documents.html

[3] how long I should keep financial documents: http://www.bargaineering.com/articles/how-long-should-i-keep-financial-documents.html

[4] talked to Alicia Rockmore: http://bucks.blogs.nytimes.com/2010/03/25/financial-tuneup-an-experts-tips-for-organizing-electronic-documents/

[5] Buttoned Up: http://www.getbuttonedup.com/

[6] TrueCrypt: http://www.truecrypt.org/

[7] mucio: http://www.flickr.com/photos/mucio/2889899144/sizes/m/

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