How to Go Paperless (Securely) with Your Finances
Laura provides five steps to manage your finances with no or much less paper. Learn the pros and cons, a few paper exceptions to consider, and how to make a digital transition as easy and comfortable as possible.
Laura Adams, MBA
Listen
How to Go Paperless (Securely) with Your Finances
When my husband and I moved an overstuffed, four-drawer filing cabinet from Florida to California a couple of years ago, I knew it was time to downsize my paper records.
I had already done a huge purge before the move, but I was still holding on to way too much paper. Now, I keep a fraction of the paper in one file drawer, but I have to admit that getting there hasn’t been easy.
In this episode I’ll give you 5 steps to manage your finances with no or much less paper. You’ll learn the pros and cons, a few paper exceptions to consider, and how to make a digital transition as easy and comfortable as possible.
Free Resource: Laura’s Recommended Tools—over 40 of the best ways to earn more, save more, and accomplish more with your money!
Pros and Cons for Going Paperless
Moving your money management into the digital world comes with huge benefits. I’m sure you know that going paperless saves trees and a host of other environmental resources.
According to the Environmental Protection Agency (EPA), paper makes up 27% of all municipal solid waste. That’s the largest percentage of the 250 million tons of waste we create in North America each year!
According to payitgreen.org, by going paperless for just one year, the average household saves 6 pounds of paper, 23 pounds of wood, and prevents the production of 29 pounds of greenhouse gases.
Paper documents also demand our time, attention, and physical space to process, store, or shred. Plus, many contain personal information that could be used against you if they fall into the wrong hands.
On the flip side, digital documents are easy to store, organize, and find later on. However, there are some downsides to consider, like security. I’ll tell you how to stay safe and which paper documents you still need to keep, in just a moment.
5 Secure Steps to Manage Your Finances Digitally
Here are 5 secure steps to go paperless with your personal finances:
Step #1: Transition to e-documents
The first step is to shift your thinking and realize that paper is not your friend. If you open up your physical mailbox and see paper inside, ask yourself how to avoid getting it in the future.
Here’s how I handle my mail:
- Throw away junk that doesn’t contain personal information, such as my name, address, or account numbers.Â
- Shred junk that does contain personal information, especially pre-approved offers for credit cards and insurance.Â
- Shred documents that I can access online, like utility bills and insurance policies, and then request an e-document, when possible.Â
- Scan documents that I need, such as statement that isn’t available online or a business receipt, and then shred the original.Â
- File original documents that I need or want, such as a product warranty, a signed contract, or a handwritten note.
Be proactive to stop or reduce the amount of paper mail you receive. Even something good, like a paper check, could be direct deposited into your bank account instead.
Some companies even charge less or offer financial incentives when you choose e-statements.
Anytime you receive a financial document or bill in the mail—like a bank account statement, credit card bill, utility bill, or insurance statement—log on to the company’s website and create an online account.
You can typically click a button that says something like “go paperless” or “stop your paper bill.” Some companies even charge less or offer financial incentives when you choose e-statements.
Here’s a tip if you get a lot of junk mail for pre-approved offers of credit or insurance that you don’t want: opt out at optoutprescreen.com. This is the official, centralized site where you can choose to be removed from the offer lists provided by the major national credit reporting companies.
Also opt to receive store receipts by email, when clerks offer it. It’s most important to have receipts for purchases that are expensive, tax-deductible, or when you think you might return the item. But if you don’t need the receipt you can review it for accuracy on the store’s monitor and decline the receipt.
Remember that as you make the transition from paper to e-documents, you can always print out digital versions when it’s absolutely necessary.
Step #2: Set up secure storage
I recommend that you don’t just look at financial statements online–go ahead and download them to your computer for future reference. This also applies to incoming email receipts, especially when it’s a tax-related expense.
Some financial institutions may only offer free access to online documents for a limited period of time. If you need them later on, they might not be available or you might have to pay for access, which is why it’s easier to save them as you go.
Brokerage statements are important to keep indefinitely since you’re responsible for reporting the cost basis of any security you sell to calculate the capital gains tax. So, if e-documents aren’t available, be sure to scan them and keep digital versions. I’ll give you some easy scanning solutions in step 4.
Once you begin receiving e-documents, you’ll need to keep them organized and secure. Create a folder on your computer with sub-folders for each type of document that you want to save. Create naming conventions that include the company or category name, month, and year, so it’s easy to search and find any document quickly.
For instance, you might have a sub-folder for paychecks, investment statements, trade confirmations, tax-deductible items, insurance, or any type of document that you might need in the future. Â
You can add a layer of protection by requiring a password to access your main folder. Also keep your computer’s operating system and security software up-to-date to ward off cyber criminals.
It’s a good idea to store important e-documents in multiple places so your information could never be lost in a computer crash or a fire. Also keep them on an external drive and store them remotely using a secure cloud-based option like Backblaze, Evernote, or Dropbox.
It’s a good idea to store important e-documents in multiple places so your information could never be lost in a computer crash or a fire.
Step #3: Make all payments online
Once you get into a routine of processing your incoming documents electronically, it’s time to focus on outgoing documents, like your payments. If you’re still buying, writing, and mailing paper checks, this is a heartfelt plea to stop!
Not only are paper checks costly and time consuming to write and mail, but they can be stolen from your mailbox or at the receiving end. I recommend sending all of your payments using free bill pay through your bank.
All you need to know is a payee’s name, mailing address, the amount you want to pay, and the date you want your payment to arrive. The bank sends your money electronically or prints a paper check, seals it in an envelope, and even pays for the stamp!
You can opt to receive your e-bills by email or through your online bill pay platform, which makes it easy to stay on top of due dates. Bill pay is my favorite banking service because it’s so incredibly convenient—and free to boot!
You can manually enter payments to be sent right away or on a date up to one year in the future. You can also set up automatic withdrawals so you don’t have to enter your regular monthly payments for loans and lines of credit.
Another option if you need to send money instantly to someone like a handyman or a coworker is PayPal, which connects to your bank account or credit card. It’s free to send money to friends or family in the U.S. Your bank may even have a similar option that allows you to send money instantly using an email address or a mobile phone number.
While we’re talking about apps, I want to go back to the topic of depositing paper checks. Most employers and government agencies offer direct deposit, but many vendors and individuals may still be sending you paper money.
Here’s another impassioned plea: stop making trips to the bank to deposit paper checks! It’s a huge waste of time because most banks offer remote deposit.
Simply use your bank’s app on your smartphone to deposit any paper check by snapping a picture of the front and back, and hitting the deposit button. This doesn’t eliminate the paper, but it allows you to make the most of it by depositing a check immediately anywhere you have an Internet connection.Â
Step #4: Set up convenient scanning options
A key part of going paperless is making it easy to scan documents that you don’t need to keep in physical files, so you can shred and recycle them.
Many printers have built-in scanners. But there are other great options like the super-portable Doxie scanner. The Neat scanner integrates with a variety of accounting software, such as QuickBooks and TurboTax.
You can even use apps that turn your iPhone or iPad into a mobile scanner. For instance, with apps like Scannable you can scan one or multiple pieces of paper. Then it sends your file directly to Evernote and other apps, so you can upload, email, or text your e-documents.Â
Other recommended free apps for your Android and iOS devices include Google Drive, CamScanner, and Genius Scan. They all have amazing features and integrate with a variety of other apps.
Dealing with your existing paper is probably the most difficult part of going paperless, but I can promise you that it’s also the most rewarding.Â
Step #5: Pare down your old paper
Once you cut down your incoming and outgoing paper, take the time to address your existing paper files. This could be a major task if you’ve been accumulating paper for years or decades.
Dealing with your existing paper is probably the most difficult part of going paperless, but I can promise you that it’s also the most rewarding. It could take days, so pace yourself and stay committed to your digital transition.
Sort through your files or stacks of paper and put every piece into one of 3 piles to shred, scan (and then shred), or keep. The “keep” pile should be tiny and only include official or legal documents including the following:
- Titles and deeds to propertyÂ
- Home closing documentsÂ
- Birth, adoption, and death certificatesÂ
- Marriage and divorce certificatesÂ
- Military recordsÂ
- Wills and medical directivesÂ
- Legal documents with original seals and signatures
How to Maintain Your Tax Returns
You might be wondering what to do with your old tax returns. Keep digital copies, including all supporting documents, for a minimum of 3 years. However, if you have complicated transactions—such as the purchase or sale of investments—keep digital copies of your tax returns, including the backup, for 7 years.
Also, don’t forget to keep digital copies of your health insurance records or premiums paid each year, so you can prove that you and your family complied with the Affordable Care Act, known as Obamacare.
If you have a big stack of documents to scan, consider outsourcing the work to a local service and then shredding the paper. With a paperless system in place, you’ll probably find that you only need a small drawer for your essential files.
Don’t wait to go paperless until after you deal with your existing paper. Just get started now, stop the influx of paper, and create a streamlined digital system that’s simple to maintain going forward. You’ll feel great about helping the environment, saving time, saving space, and cutting the clutter in your home.
Get More Money Girl!
Want to know the best financial and productivity tools that I use and recommend to save time and money? Click here to check out 40+ tools I recommend!
To connect on social media, you’ll find Money Girl on Facebook, Twitter, and Google+. Also, if you’re not already subscribed to the Money Girl podcast on iTunes or the Stitcher app, both are free and make sure that you’ll get each new weekly episode as soon as it’s published on the web.
Click here to subscribe to the weekly Money Girl audio podcast—it’s FREE!
There’s a huge archive of past articles and podcasts if you type in what you want to learn about in the search bar at the top of the page. Here are all the many places you can connect with me, learn more about personal finance, and ask your money question:
- Dominate Your Dollars – Laura’s private Facebook Group
- Money Girl on Facebook
- Laura on Facebook
- Google+
- Money Girl podcast on iTunes (it’s free to subscribe!)
- Money Girl on the FREE Stitcher app (also free to subscribe!)
- Email:Â LauraDAdams contact
Click here to sign up for the free Money Girl Newsletter!
Download FREE chapters of Money Girl’s Smart Moves to Grow Rich
To learn about how to get out of debt, save money, and build wealth, get a copy of my award-winning book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite bookstore as a paperback or e-book. Click here to download 2 FREE book chapters now!
Girl Hugging Tree in the Forest image courtesy of Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.