There are many reasons people choose to digitize their documents.
Having digital copies allows you to find files quickly and easily. You can set up your filing system so that you can access your digital copies from any location. That means you can also share files with others. And there’s the great side benefit of having less paper sitting around.
There are documents, though, that you should keep as hard copies. The list depends on your personal circumstances, but it includes vital paperwork such as birth certificates and marriage licenses. See more here on what paper you need to keep — and for how long.
You should store these hard copies in a fireproof safe or bank safe deposit box. But it’s still a good idea to make digital copies of those records. There are other documents that you can keep solely in digital form.
In this article, I’ll show you the steps for creating and maintaining a digital filing system for all your important documents.
Why You Should Have Digital Copies of Your Important Financial Documents
Scanned copies of some legal documents are not considered valid — even if the originals are lost or stolen. But it will be easier to replace those documents if you have a scanned copy.
Plus, it’s convenient to be able to access any of your information on your computer, phone or tablet. I can’t count the number of times I have been asked to provide certain material and, instead of looking through a file cabinet or searching around my house, I simply pull it up on my computer or another device. From there, I can email or print copies of documents if needed. It’s a huge time saver.
The best part is that you do not need a lot of expensive equipment to do this. A computer and scanner are all you need. You can also scan items with your phone or tablet using the built-in camera.
So once you’ve made digital copies, where do you store them?
Where To Store Your Financial Documents
Online Storage Options
I prefer not to store copies of my personal documents online. But if you choose to do so, you have plenty of choices for online storage. And many of them offer basic storage for free!
Three of the most popular options are Google Drive, Apple iCloud and Microsoft OneDrive. Here are details on each.
If you have an Android phone or tablet, you probably have a Google account. Anyone can create a Google account for free, and it doesn’t matter what device or operating system you use. The account comes with 15 GB of free storage, shared across Google Drive, Gmail, and Google Photos.
If you require more storage space, Google One offers several paid plans. At the time of this writing, plans cost $1.99 a month for 100GB, $2.99 a month for 200GB and $9.99 a month for 2TB. You can get a discount if you pay for a year in advance.
If you use an iPhone, iPad or Mac, you likely use Apple iCloud. (iCloud can be used on your Windows computer as well.) The free Apple account comes with 5GB of storage. If you need more space you can purchase a paid plan. Apple offers 50GB, 200GB, or 2TB plans.
Do you subscribe to any of Apple’s services such as Apple TV or Apple Music? You may get a discount if you sign up for Apple One. Read more about Apple’s pricing and plans here.
OneDrive Basic offers 5GB of free storage. Paid plans include OneDrive Standalone 100GB of storage for $1.99 a month, Microsoft 365 Personal at $69.99 per year with 1TB and Microsoft 365 Family at $99.99 per year with 6TB. Microsoft 365 Personal and Microsoft 365 Family come with the office apps Microsoft Excel, Word, Outlook and PowerPoint. Skype is also included.
Local Storage Options
If you prefer local storage (storing digital information on physical storage devices) be sure you have a backup plan in place. Once the items are saved to your computer’s hard drive you want to run a backup regularly. I recommend backing up daily or at least weekly.
If you are using a Windows computer you can schedule an automated backup using Windows File History.
To access Windows File History in Windows 10, type “backup” in the search bar and then select “Backup Options” from the search results.
You can also click the “Start” button and then click “Settings.” In the settings menu, select “Update & Security” and then select “Backup.” Click on “Add a drive” to select a location to save the backup and then choose “More Options” to select how often you would like the backup to run and what files and folders to include in the backup.
If you use a Mac, you can use Time Machine to back up your files. See Apple’s website here on how to configure Time Machine to back up your files automatically.
An external hard drive is an ideal backup location. These drives connect to your computer, usually through a USB port.
External USB hard drives are very affordable. You can easily find 1 and 2 TB drives starting at about $50.00. Amazon and Newegg are both great sites to purchase an inexpensive hard drive. Make sure you comparison shop to find the best bargain.
How To Digitize Your Financial Life
Make a List
You should include all appliances and other items of value in your home on your home inventory list. Enter the name of each item, the date it was purchased, where it was purchased, the cost, warranty information, serial and product numbers and any other relevant information.
Then take some photos: a photo of the item itself and of the stickers and tags that show the serial number, product number and other important information.
Keep the home inventory list and the photos in the same main folder as your other scanned documents (more on that below) so that it also gets backed up.
It’s a good idea to have a digital copy of your medical records. At your next doctor’s appointment, you can ask for this. Many hospitals and doctor’s offices now offer an online portal so you can log in and download copies of your medical information. Call your doctor and hospital and ask them if they offer an online portal and, if so, how to sign up.
I also recommend making a list of the contents of your wallet: credit cards, debit cards, driver’s license, insurance cards, etc. Obviously, you want to record your account numbers, but you should list the phone numbers and websites of the card issuers as well. If your wallet is lost or stolen you’ll need that information to report the loss.
Documents such as store receipts for major purchases, bank statements, and utility bills should also be on the list.
If you are going to use your computer to save the documents you scan, you should create folders on your computer to store and organize the information. I suggest using the Documents folder as your main directory.
Inside your Documents folder, create subfolders to organize the data. You can organize them in a way that makes the most sense to you. Not only does creating these folders make finding your files easier, having everything in one location makes backups a snap.
After you have chosen a place to save the documents, start scanning. I find it best to save documents as PDF files, but there may be certain items you would like to save as an image or some other type of file.
Gather all of your documents from your inventory list and start scanning and saving the files. Many of the documents you scan can later be shredded, but make sure you run a backup before you do that.
Some scanners have the option to scan in color or black and white. If your document is in color, choose the color option. If it is a black and white document, scan it in black and white. The image quality will generally be better if you do that.
You can use a scanner attached to your computer or you can just take photos of the documents using the built-in camera on your phone or tablet.
If you use Google on your Android device, you can use the Google Drive app to scan. Open the app and in the bottom right corner tap “Add.” Then tap “Scan.” Take a picture of the document you would like to scan. You can adjust the image if you like and then tap “Save” when finished. The document will be saved in Google Drive.
If you have an Apple device, you can use the Files feature to scan documents and then save them to your iPhone, iPad, iCloud or a third-party location such as Dropbox, Microsoft One Drive or even Google Drive.
Organize Your Files
Open the files app on your iPhone or iPad and navigate to the location where you would like to save the file. If you don’t see the service you use, tap the ellipsis icon (“…”) in the upper right corner and then tap “Edit.” If that app is currently installed, you can select it. If not, install the app where you plan to store your files.
Once you select the app, tap the ellipsis icon near the search bar and then tap “Scan.” Take a photo of the document. The scan will be saved in the location you chose.
Some phones and tablets also have the ability to save to a memory card in the device. Regardless of where your files are saved you always want to keep a backup copy on your desktop computer. Don’t depend on cloud storage exclusively. While it is convenient for some things, there’s always the chance that the site can be compromised, potentially exposing you to identity theft.
If you’ve been counting, you’ve already figured out that I’ve written about three different copies of your important data. One would be your main copy (on your desktop). Then you want to save that same information in two different physical locations such as secondary hard drives or online.
If you’re as committed as I am to maintaining this kind of information “insurance,” you can save everything to several hard drives and keep one of those drives locked in a fireproof safe.
Just be sure to do regular backups of your main hard drive and back up all locations when you add new scans or lists.
This may seem like a lot of work, and it is, but only at first. Once you have everything scanned and saved, you just add new information as you get it and then run backups.
You can eliminate a lot of paperwork (and therefore a lot of scanning) by signing up for online bill payment. Instead of receiving a bill or bank statement in the mail each month, just log in online and download copies of your invoices and statements.
One final word of advice from this IT professional: Always be sure to password-protect your computer and other devices so that your information remains secure.