Storing financial records in the digital age
The age-old practice of storing crumpled restaurant receipts and dog-eared employee payment stubs in a shoebox is fast falling out of favour. Instead, the Internet is now a high-tech receptacle for countless financial documents including bank statements, credit card purchases and income tax installments.
"Online statements have really changed what documents Canadians are keeping," says Chad Viminitz, a certified financial planner with RTR Advisory Group in Edmonton, Alberta, and author of "Money Assassins." "If you're under the age of 40 or 45, chances are, you don't keep a paper trail. Instead, you're probably relying on the fact that you can get your documents back in electronic form if you need them."
But while Viminitz says it's true that "the electronic age has probably saved" many disorganized Canadians from having to dig through a pile of paper, there's something to be said for that shoebox -- and maintaining a proper paper trail of your financial records.
For instance, in the case of some statements, Viminitz says Canadians would be wise to keep their original documents on file. "Life insurance, critical illness, disability and long-term care insurance are really the four personal insurance policies for which people should keep their original documentation," advises Viminitz.
Receipts are another item that are perfect for your shoebox as they are often difficult to track down in electronic form. Business-related receipts saved for income tax purposes should be kept for six years to support your claims in the event of an audit, according to the Canada Revenue Agency. But Viminitz warns that while "the general rule is six years to keep your business receipts, the government can go back as far as it wants." So be sure you shred discriminately.
As for receipts for everyday purchases, Viminitz says these can be thrown away once you've checked to make sure your bank or credit card statements are accurate.
Annual investment records are another type of financial document that can be challenging to keep track of both on- and offline. "When people open up five or six different accounts in their investments, they receive five different statements -- that's just a nightmare to track, especially for older clients," says Viminitz. For this reason, Viminitz recommends that Canadians "keep paper copies of at least the past five years of their annual investment statements in a central location such as a binder." Similarly, annual retirement plan statements should be stored for five years or until you retire.
Nevertheless, there are some benefits to maintaining electronic records. For example, if you need to dig up a past credit card statement, your bank's website is the perfect place to locate archived statements. Your income tax year's notice of assessment can also be accessed online via Canada Revenue Agency's website -- a handy repository if you're ever faced with an audit or credit check.
But before you rely solely on a government or financial institution's website for safe document storage, Viminitz recommends "making sure that the online backup system will keep your records for seven years." Very few do, which is why it's critical that you preserve paper copies of documents used for business or tax purposes.
After all, says Viminitz, "There's a reason why the shoebox has stood the test of time."
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