October 31, 2020

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5 Reasons to Digitize Your Financial Records

From bank statements and brokerage forms to tax documentation in advance of the April 15 deadline, your life, and your mailbox, is overflowing with paper forms. You know these pieces of paper are important, and you diligently store them away, filling binder after binder in the process.

Now that you have accumulated all that paper, what do you do with it? Do you keep those financial documents indefinitely, letting the paper pile up until it fills your available storage space, or is there a better way to store those vital financial documents? Here are five great reasons to digitize your financial records, so you can finally shred those paper forms.

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Simplify Your Life

Decluttering has become a way of life for many people, and for some it is almost a religion. Clearing away the clutter is a great way to simplify your life and reclaim the space you have lost to unnecessary paper files.

When your important files are digitized and stored securely, you can take back the space you had been using for the storage of paper files. Just think about all the things you could do with that space, then grab your scanner and get going.

No Physical Storage Space Required

Even a year’s worth of financial documents can easily fill an office binder, and the more accounts you have the more space will be required. Just a quick glance at your accumulated documents will tell the tale, so why not clear off those shelves and fill them when better things?

Digital documents do require storage space, just not of the physical variety. And since those digitized documents are likely to be rather small, the storage requirements should be minimal. A tiny thumb drive is certainly less space intensive than a bookcase full of office binders.

Reduce the Risk of Identity Theft and Account Fraud

Every paper document is a potential threat if it falls into the wrong hand or gets lost in the shuffle. A single bank or brokerage statement could be solid gold to an identity thief, and the information it provides could lead to an actual theft.

If you do not want your bank accounts drained or unauthorized withdrawals from your brokerage account, do yourself a favor and eliminate those paper files as soon as possible. Scanning what you need and shredding the rest is the best way to protect yourself from identity theft and other potential risks.

Make Tax Time Easier

Having your 1099 forms, old pay stubs, bank statements, brokerage forms and other financial documents in a digital format will make tax time easier. Most of the major tax preparation software packages can accept digital documents in PDF format, and that alone could save you hours of time as April 15 approaches.

That digital financial documentation will make the current tax season easier, but it could make your life easier should the IRS come knocking later on. If the tax agency questions a figure on a past tax form, finding the document you need could be as simple as searching your cloud storage drive or looking on your computer.

Eliminate Paper Clutter

No one likes clutter, and all that paper hanging around just adds to the problem. If you have binders bulging with old tax forms, outdated bank statements and other financial documents, some start digitization could help you clear them out.

Just go through the documents you have accumulated over the months and years, eliminate the ones you no longer need and scan the rest. For the most part you should not need to keep bank statements that are more than a year old, so feel free to shred and discard them. Once everything else is in digital format, you can save them to your computer, cloud storage account or external storage device.

If you are still relying on paper files to manage your financial life, there is a better way. Taking those important but space-intensive files digital has many benefits, from easing the stress of tax time to giving you more space for other things.

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