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The Paperless Lifestyle Part 2 – JohnnyB

In Part 1 I discussed using Bill Pay to reduce your front-end work at going paperless. In Part 2, I will quickly cover scanning, shredding, online storage, and the all-important regular backup. But first a disclaimer: Electronic record keeping as a replacement for real paper is governed by many overlapping laws, rules and corporate policies, the most important one being IRS Revenue Procedure 97-22. It is my understanding that the IRS will accept printouts from electronic copies as long as they contain all the same information as the paper records are required to have such as date, amount, etc. However, many stores will require original receipts, so saving receipts is still necessary at least until you know you won’t be returning anything. I am not an accountant nor a lawyer. Please seek professional guidance on creating your own paperless system before destroying your real papers!
Ok, let’s get started. The first step in going paperless is scanning. Scanners are very inexpensive now and you do not need anything other than a flat-bed scanner. However, a document feeder is handy for scanning stacks of papers. Simply scan your papers in a format such as JPEG or PDF. I find 150DPI is adequate resolution while keeping file size small. Give the files meaningful names. I name files using the date, who it came from, a reference number, what it is, and a page number. For example: 2008-01-31-WellsFargo-1234-Statement-1.jpg. Then I put the file in a directory/folder named “Paperless” on my hard drive. I create directories for each year and subdirectories inside those for each major entity or category. Make your own directory structure that makes sense to you. In my opinion, this type of organization system is only scalable enough for individuals and small businesses. Larger businesses should look at commercial applications for indexing and securing the records in a multi-user environment. And it’s worth mentioning that the computer you are using should be reasonably secure physically and/or cryptographically from data theft. For the original document you may choose to continue to file it in your real-paper files (a good idea during the transition period) or you may choose to shred them. If you choose to shred them, you may want to delay shredding until after your periodic backups are done, just in case. Note that there are some documents that should never be shredded — use common sense — they don’t call them vital records for nothing. Finally, and most importantly, you must backup your records on a regular basis! A simple copy of your paperless directories to a CD-R or external hard drive on a weekly basis will do. Keep the backup media in a safe place away from your computer. A less regular off-site backup is recommended as well — perhaps a monthly CD-R that you put in your safe-deposit box. That’s all there is to it!

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2 thoughts on “The Paperless Lifestyle Part 2 – JohnnyB”

  1. Using CD-R discs for backups isn’t a good idea – the dye used isn’t guaranteed for any significant length of time which means you can’t really trust them for more than, say, a year.

    External hard drives are a better bet, preferably a rotating set.

    If you’re not backing up that much stuff, flash memory should retain data without power for up to 10 years, and you could probably store scanned copies of all your paperwork on one little SD card. I paid £40 for an 8GB SDHC card a couple of weeks ago in London – in the US you could probably get the same capacity for US$40.

  2. Good point, John. In my post I did not discuss the concept of archives, which may well be integrated with the backup system, but are completely different from backups in concept and purpose. A backup is simply a copy from which to recover in case of a data loss. Backups are short-lived, in my mind. Once you have one (or two) verified, recent backups, the older backups are no longer needed and should be destroyed or reused in the case of certain media. In the example I gave in my post, the expected lifetime of a backup is a few months max. Archives are different in that they are intended to exist for a long period of time. For example, the IRS wants you to save certain records for up to 7 years. You may not want to or be able to keep 7 years of records on your main hard drive so you would create an archival system. You move the older records to another storage system to free up space. It is important to note that your archives themselves must be backed up regularly, or as you mentioned, rotated. Electronic archival for longer periods of time is tricky indeed, just ask NASA. They have to copy massive amounts of data to newer media in a desperate race against media degradation. The data they have is decades old, cost billions to acquire, and much of it only ever existed in digital form. It is literally priceless and irreplaceable. But even us non-rocket scientists have digital photos that we want to store “forever”. Tricky indeed. My current solution is portable hard-drives backed up by more portable hard-drives (up to 1 terabyte!), which are replaced every few years as the hard drives get larger and cheaper.

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