PAPER OR DIGITS?
The Budget Doctor’s Advice on Financial Records
It is now possible to buy a computer with no data storage device. That means that any saved information must fly through the air and reside some place we will never see. That is where our family photos, our check registers and even our entertainment will live. There is even some question about who owns the things we store in clouds and fog banks so maybe it isn’t ours.
Smart phones can go further and disconnect us from the computer. We can deposit checks and pay bills. We can show our living will at the hospital and find the deed to the house without going to the courthouse so why do we need any real records? Your tax returns are safely stored on your hard drive or out in space so why print them out? You can access your insurance policies on the carrier’s Web site so why keep a paper copy?
Paper and CDs don’t help the environment and they take up a lot of space so it can be good to move a lot of storage into the vapor, but as you may suspect, there are a few rules:
- Anticipate disasters.
Your computer will die. You will lose everything on your storage device. If all your passwords are stored on your computer you will return to the Stone Age. If your financial records are stored on that same storage device you will spend days reconstructing them. Even web sites and external storage sites can and do disappear taking all files down as well. And don’t forget cyber attacks, nuclear war and divorce decrees.
- Assign trust.
When you trust your records to the cloud, you are expecting any number of companies to behave ethically, responsibly and successfully. There are very few companies that do all three of these on a regular basis.
- Manage risk.
Once you identify the risks in digital records, develop a plan for addressing that risk. The key term is “back up” and that does not mean copying your C drive to your D drive. It means having physical access to the most crucial documents.
- Plan for technology obsolescence.
If your document back up is on a floppy disc you may no longer have physical access to the information. DVDs and CDs will quickly be replaced by items with larger profit margins and external storage devices will have different connections and standards. You need to update at least every five years.
- Consider others.
At some point, it will be necessary for someone else to access your documents. The material must be available along with directions on where to find it. Throwing jump drives into a drawer isn’t enough.
Digits are good. Few trees are destroyed in creating them and they can be stored cheaply with little risk of fire. Still, your 8 year old can run a magnet over your storage device and wipe it out or a virus can make it dangerous to even look at the material. There will always be the need for information storage and there will always be advantages and disadvantages for every storage system. The best advice is to choose two systems and review both of them regularly.
Do be careful about using your smart phone as your information depository. Smart phones have a life expectancy of 23 months (that is why there are 24 month contracts). Smart phones can be lost or stolen or hacked just like computers. Plus, using your smart phone as your information depository can lead to asking Siri for financial advice.