Six Tips for a (Nearly) Paperless Home Office

Question: I've been considering making my home office 100% paperless, but wanted to know if there are any risks. Are there any paper statements or other documents that I must keep?

Answer: For many people, saving physical documents provides a sense of psychological security. It can be comforting to have tangible proof that you actually own what you think you own or paid what you thought you paid.

From the standpoint of real security, however, that comfort might be illusory. The more financial documents you have whizzing around in the mail and sitting in files in your home office, the more you expose yourself to the threat of identity theft. Moreover, creating a well-thought-out system for storing digital information can ensure that you're tackling bills on time and reduces the chance that you'll misplace important documents. Cutting your household's reliance on paper documents is also the green way to go. In short, I think the benefits of going mainly paperless far outweigh the potential risks.

To make the transition to an all-digital home office as seamless as possible, however, you must first put your own systems and safeguards in place. Take the following steps to do so.

Secure Your Home System
An essential first step when transitioning your home office to digital is ensuring the security of your in-home computer network. That means making sure you have up-to-date antivirus and antispyware software as well as firewalls and a good spam filter. A good system for periodically backing up the data on your computer is also essential. An external backup drive is adequate, but an online backup system, which holds your backup files offsite, is even better.

Additionally, because on your computer you'll be saving financially sensitive documents that could be manna for identity thieves, you'll need to take steps to password-protect those documents. (Passwords that combine numbers and letters are the most effective.) Finally, be careful about trying to access financial information when you're away from home, and never log in to any of your financial accounts when using a public or unsecured network.

Stress-Test Your Providers' Information Systems
The next step before going paperless is to conduct a quick audit of the quality of the digital statements provided by your banks, brokerage and mutual fund companies, and any other companies with which you regularly do business. In most cases, you'll find that the digital statements provide you with exactly the same level of detail as the paper documents you received in the past. (They might, in fact, be mirror images of them.) Here again, be savvy when creating passwords for your information on external providers' sites.

In addition to getting comfortable with the retrieval your digital statements, see how long the institution will store past statements and other information on its website. Can you retrieve statements going back several years? If you expect to need supporting documentation longer than your provider will make it available, plan to save a copy of the statement on your own computer. (Be particularly attuned to this issue if a document relates to a previous year's tax return; the IRS can audit tax returns for up to seven years.)

Create a Logical Digital Filing System
When creating a secure home-computing environment to safely manage your sensitive financial information, you'll also want to create an intuitive organization system for your digital files. If your filing system for your paper files worked well for you in the past, there's no reason you can't duplicate it for your digital documents, too. Consider broad topic folders--"Insurance," for example-- combined with subfolders such as "Auto Insurance." Also create a password-protected digital directory of your various accounts, including user names and passwords, and URLs as well as information about where on your computer you're storing the related documents. Not only will such a document prove invaluable for your loved ones if something should happen to you, but it will also help you manage the plethora of information for each of your accounts. Here's a document you can use as a template for your own master directory. 

Get a Plan for Receipts
Receipts and travel-related clutter can be some of the worst desk detritus. Recycle receipts for small, everyday purchases, while scanning in receipts for items you might need to return or otherwise document the proof of purchase. Nearly all stores will honor a scanned receipt just as they would an original.

Stop It at the Source
Signing up for digital document delivery is a key way to reduce the flow of paperwork coming into your house, but that won't head it off entirely. If you're receiving unwanted flyers, catalogs, or other solicitations, call the company's number and ask to be removed from the mailing list. This Federal Trade Commission post includes a phone number for opting out of the preapproved credit card offers that are a frequent source of noisome junk mail.

Secure Safe Physical Storage for Hard-to-Replace Documents
Although it's possible to transition nearly all of your files from paper to digital, you can't avoid storing at least a few physical documents. Certain very hard-to-replace items--including certificates of marriage, birth, death, and adoption; Social Security cards; deeds; and car titles should be stored in a safe-deposit box or an in-home fireproof box. It's also a good idea to keep a copy of estate-planning documents in your home; alert a close loved one of these documents' existence and location.

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