Wadih founded both PairSoft and PaperSave. He is an avid technologist who specializes in streamlining operations and maximizing productivity.View all posts by Wadih Pazos
Wadih Pazos • October 1, 2021
Now these modern methods are changing the way we keep and track our financial records as well. Gone are the days when a box full of receipts or a haphazardly organized filing cabinet were the best methods for storing and collecting financial information. It is still important to keep and categorize your financial documents. The New York Times reported that the IRS can demand financial records for up to six years after filing a tax return so having a secure storage system for your records is a must.
However, that solution no longer needs to be a manual paper filing system – with a scanner and a digital storage space anyone can ditch the filing cabinet or shoebox and move on to time saving digital storage. In fact, digitally stored documents are less likely to be lost or stolen, according to Bankrate. Digitally storing your documents can help save time when searching for a financial record from the past. A digital system is searchable much faster than a manual one, but electronic storage is only as good as the medium chosen to store the files on. There are two main schools of thought about how to store your files on the web at at home:
A web-based system that takes advantage of the cloud can be an excellent choice. It is by far the cheapest option, with many companies offering gigabytes of storage for free, plenty of space for most people to store years of financial paperwork. Even if you need more space, it is often able to be had for a very reasonable rate. Bankrate says that most companies charge in the vicinity of $5 per month to securely backup your digital files. The web based systems are extremely reliable and not exposed to the vagaries of life that could compromise a hard-wired one. Internet based storage can’t crash or break, and the hardware won’t fail like a home-based system could.
However, internet-based systems do have a few drawbacks. Because they are hosted on the Web, these systems will have occasional connectivity issues and may be unavailable from time to time thanks to issues with the network. They can also be slow to use, especially as more and more data is stored within them. The remote nature of the connection can be stressed by large amounts of data. Though companies providing these types of services do their best to protect your data, an Internet-based system is not completely secure. Data stored on the Web is vulnerable to getting hacked and stolen, however remote a possibility that may be.
The other main option when looking to store digital financial documents is a hard-wired system, usually taking the form of an external hard drive. These systems are generally small and cheap options. A USB thumb drive, the smallest and cheapest form of external storage, is no larger than a finger, and even the larger models of external drives will comfortably fit in a small space next to the computer. They are extremely secure, as the system is not connected to the Internet, so a criminal would need to take the physical unit in order to gain access to the data stored within it. They also have much higher transfer speeds from the computer to the storage unit, which is especially useful when moving large files back and forth, Bankrate noted.
But the external hard drive system has its cons as well. Their small size is convenient, but it can also be problematic. If the device is not used very often, it can get lost in the shuffle of life and be misplaced, meaning that you would lose access to the data stored within it. External drives are also machines with moving parts, so they can fail or be compromised by damage.
Both methods have their pros and cons, but either is a solid option when attempting to replace an old and outdated storage system with digitally stored financial documents.