Get your data in order

Follow these tips to organize, protect and keep track of your personal financial information

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By Amy Merrick

Whether it’s online banking statements, quarterly investment reports, insurance contracts or tax returns, you likely have a pile of financial documents collecting dust on your desk, stuffed into a drawer or clogging your inbox. Without a system to organize it, you can’t find data when you need it. It could also make you more vulnerable to hackers and identity thieves. Use these tips to bring order to the chaos.

Create a system that works for you

Start by making a list of all your financial accounts. This should include the name of the institution that holds it (such as a bank or credit union) and the type of account, such as checking, savings, credit card or retirement.

Once you have a handle on your accounts, you can develop a plan for organizing statements and other data pertaining to them. You can store your financial documents either on paper or digitally, according to the Consumer Financial Protection Bureau1. What’s important is to have a system and follow it. If you keep paper copies, one strategy is to designate a different colored folder for each type of document. For example, you could keep assets and investments in a yellow folder and credit reports in a blue one. Paper documents should be stored in a secure locked cabinet.

If you store financial documents on your computer, you can organize them using a folder method, just as you do with paper files. Keep files of similar types – for example, mortgage statements, 401(k) documents, etc. – in their own folders on your computer. Make sure that access to your computer or electronic devices requires a password or PIN and is kept physically secure.

Protect your digital data

If you store your data online, the Consumer Financial Protection Bureau recommends keeping copies on a secure cloud storage service or backing up your data regularly on a physical hard drive.1 Make sure that the hard drive is password-protected, encrypted and stored in a secure place.

With cloud storage, your data is kept on computer servers maintained by a cloud storage service. You access your data through the Internet. Some popular services are Google Drive, Apple iCloud, Box, Dropbox and Microsoft OneDrive.* While data on the cloud may be stored in an encrypted form, that doesn’t necessarily make it hacker-proof. To better secure your data, Scientific American recommends you encrypt any data you upload.2

These services back up your files, and you can access them from multiple electronic devices, such as a laptop and smartphone. Some cloud storage services are free. Others charge a fee, especially if you want to store a large number of files.

Keep only what you need

Whether you receive paper or digital copies, you may get financial statements each month, quarter or year, depending on the type of account. Most people should keep monthly bank statements for a year, or for the length of time that your bank allows you to challenge errors, if that is longer. After that, you need to keep only the annual statement. If you are self-employed, you may need to keep monthly statements longer to show your income history. For brokerage and retirement accounts, you can discard the monthly and quarterly statements once you receive your annual statement.

In all cases, it’s important to shred any paper statement you’re discarding that has identifying personal information, such as an account number or address.

Share selectively

It’s a good idea to legally designate a trusted person who could access your passwords and account information if you become unable to. You can do this by creating a power of attorney document. Consult with an attorney for help with this.

One way to outline your password and account information for this trusted person is through a letter of instruction. This is not a substitute for a will. Instead, it’s a practical way to record your personal information for someone if you aren’t able to explain it to them. Consult an attorney if you wish to do this.

AARP recommends including the following financial items in a letter of instruction:3

  • The location of important documents, such as tax returns and life insurance contracts.
  • Information about debts, such as a mortgage or credit card.
  • File names and passwords for online financial accounts and documents.
  • The name of the bank holding a safe deposit box, the box number and the key location.

By taking these steps today, you can help protect your sensitive financial data and make it easier to find needed information the next time you’re looking for it.

Amy Merrick teaches journalism at DePaul University in Chicago. Her work has appeared in The Wall Street Journal, The New Yorker online and the Chicago Sun-Times.