Safe Options for Storing Your Personal Financial Documents

Apr 28, 2016

With tax season wrapping up, you may be ready to do some spring cleaning by filing awayimportant financial paperwork and purging your home or office of documents that you no longer need. To help you manage this process, take a look below at some viable, secure optionscabinet-key-thumbnail for preserving your tax materials and other financial records, along with our recommendations for discarding old documents.

The best storage method for you will depend on factors such as your budget, need for space, the volume of documents you need to keep, your level of comfort in terms of access to your files, and of course, your personal preferences. For greater peace of mind, you may also want to consider using a combination of these storage methods:

Maintain hard copies: Although it may initially seem antiquated and cumbersome, keeping paper copies in a secure location is still a good way to back up your financial records. And if you keep these documents in your home, you also have a quick way to retrieve them if necessary. At the same time, paper copies can be stolen or destroyed in a fire or natural disaster, so it’s best to keep at least one digital format of your files (see below for ideas). If you decide to keep hard copies of your materials at home, just be sure to exercise caution by storing them in a locked drawer or file cabinet, safe, or lockbox—or at least avoid putting them in obvious places such as near your computer or desk.

Get an external hard drive: A portable device that can be attached to your computer through a USB port (a standard cable connection), an external hard drive is an excellent solution for storing a high volume of financial documents. Some external hard drives can hold more than one terabyte (TB) of data—enough to back up your entire computer or even several computers—but in many cases, a smaller drive such as one that holds 250 gigabytes (GB) will suffice.

There is virtually no set up involved in hooking up an external hard drive to your computer with a USB connection, and documents can be transferred from your computer to the external hard drive almost instantly. When weighing your options for storing documents; however, do keep in mind that external hard drives can be stolen or damaged, just as your computer can be.  For a list of recommended external hard drives, see PC Magazine’s “10 Best External Hard Drives of 2016” at http://bit.ly/BestHardDrivesof2016.

Take them to the cloud: Online storage services are a popular way to keep critical documents nowadays, and for good reason. A convenient way to access your files from anywhere with an Internet connection, online storage can cost as low as $5-$10 per month, and some web-based providers such as Google Cloud Storage even offer a limited amount of storage for free. Many of these services also allow you to share important files.

The disadvantages of using web-based storage is that you may experience occasional snafus in terms of connectivity, there may be limits to how often you can access your files, and time lapses may be an issue in accessing files if the service is not particularly fast. Because your data is being held on the Internet and could potentially be hacked or lost, you also need to be mindful of security features such as data encryption and password protections when selecting a provider.

Put them on a thumb drive: Lightweight and very affordable, a simple USB flash drive offers an easy and convenient method for preserving financial documents. Flash drives, which may be referred to by various names such as thumb drives or stick drives, can be quickly plugged into your computer’s USB port to capture and store your data. Some can also be password protected. They vary widely in terms of storage capacities, but as a point of reference, 32 gigabyte (GB) thumb drive can store more than 640,000 standard Word pages. The downside of using this small, portable device is that its size makes it easy to lose or misplace, and of course, it can be stolen.

How and when to safely dispose of tax records:

When evaluating how long you need to keep supporting tax documentation, a good general guideline is to keep pertinent materials for as many years as the government can audit your return or that you can request additional refunds. Although in most cases the IRS can only audit your return for up to three years, there are important exceptions to this rule that may make it advisable to hold onto these documents for between 6 to 10 years depending on your situation. For more specific details, visit the IRS website at http://bit.ly/HowLongToKeepTaxRecords.

Once you’ve determined which documents you’re free to discard, shredding is usually the best way to dispose of them in order to efficiently declutter your home or office and protect yourself from the possibility of identity theft. However, buying and using a shredder at home can be time-consuming, and having your documents shredded professionally quickly adds up in terms of costs. The good news? This week, any member of SF Police Credit Union can take advantage of our free, secure shredding service at either of our two April Shred Day events! Each member may shred up to three medium-sized moving boxes of documents at our San Mateo Branch on Friday, April 29 from noon to 3 p.m. or our Irving Branch on Saturday, April 30 between 9 a.m. and 1 p.m. For details, visit https://www.sfpcu.org/shred

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