I already have the needed equipment – a legal-sized scanner with auto-feed capability, a shredder (for destroying documents after I have scanned them), and a computer. The second important piece of this puzzle is a method for backing up the electronic copies. I currently have an external drive that I back up my computer to daily, but I also want an off-site backup location in case my house burns down.
An added benefit of switching to electronic records is that now everything will be searchable. Windows Search can, with a plug-in, index the contents of PDF files, which is the format my electronic records will be in. The old documents I am scanning myself will not be indexed because I will just be making images of them and not running any OCR software against the images, but going forward, the documents I get from the companies I deal with will be searchable.
The final step of this process is deciding on a filing method. How will I organize these files on my hard drive so that I can find what I need quickly? I actually read an article about this a week or so ago, but I can’t find it again. I can’t even remember if I read it online or in an actual magazine. Anyway, the typical choices in how to file come down to two methods – grouping by date or grouping by type. In other words, should I put all my invoices from January in one folder, or all the invoices from my electric company in one folder, all from the gas company in other, etc.? I’ve opted to go for the later method. I’ve also broken it down somewhat more by breaking out documents I only retain for one year and those I want to retain forever. Here is an image of the folder structure I’ve come up with. It’s not perfect and there are some holes – for instance, what if I get a combined bill for different services, such as internet and television from one provider? That doesn’t really fit into this scheme (unless I made a new folder labeled “Entertainment”), but I currently don’t have any situation like that, so I’m not going to worry about it. This will probably change a bit as I add items, but I think it’s a good place to start.
I also want to come up with a naming convention that makes it easy for me to identify what the contents of the document are without opening it. I’ve decided on the following: Company-N-Description-MMYYYY. “Company” will be the company the document is from, “N” is a single letter that will indicate if the document relates to me, my wife, or my daughter, “Description” will be a brief description of the document, and “MMYYYY” will be the month and year of the document. For example, a scan of my Roth IRA statement for this month would be named “Schwab-S-Roth IRA-042010.pdf”
With all the planning out of the way, I’ve started contacting the companies I have accounts with and switching to electronic records where possible. The longest part of the process will be scanning in all my old paperwork. And I still won’t be completely paperless. You’ll notice in the above folder structure that there is no spot for tax returns. I’m still hanging on to those in paper form for a while. Old habits die hard.. I also do not have any spot for my business documents – real estate buying and selling contracts, my business banking statements, etc. Those I’ll add in later. For now, I’m going to concentrate on my largest pile of paperwork, which is personal stuff. After that, I’ll move on to my business stuff, and then, hopefully, to stuff like owner’s manuals and documents for big ticket items I’ve purchased like entertainment systems, televisions, washers and dryers, etc. And at that point, I may be able to get rid of a filing cabinet or two!
And in other news, as I predicted a little while ago, hard money loan #4 has been paid off. I received the final payment yesterday.
Update: I tried the free trial from SOS Online Backup and have decided I don't like it. My first attempt at backing up files resulted in a status message that said "xxxx files backed up, 8 files not backed up. They will be backed up next time." What? They didn't say why or which files were not backed up. Their software does not have a log viewer. They have a log, but it simply gives the date and time of when the last backup was run. I was able to hunt around on my PC and find a more detailed log that listed the files that were skipped, but that info was buried amidst a bunch of other stuff. I have instead gone with Carbonite. That is the vendor my work uses, so I've got some experience with their product. For $55 a year, you get unlimited storage. I also like that their software gives you an option to put a colored dot on file icons. Green means the file has been backed up, yellow means it has a back up pending, and no dot means the file is not being backed up. If you are interested, Google "Carbonite coupon code" and you will find a link you can use to get a 10% discount.