Storing Financial Records in the Cloud

Fifteen years of data to store

Fifteen years ago I became a serious investor.  I didn’t want to pay the high commission costs that even discount brokers charged in those days. I wanted to make several very small purchases each month so that I could slowly build up a diversified portfolio of stocks.

I learned abut Dividend Reinvestment Plans (DRIPs or sometimes DRPs).  These plans allowed you to purchase stock directly from companies with little or no commission and dividends paid by your companies may be reinvested in additional shares of stock.

The one acknowledged problem with DRIPs is that you had to keep all the individual records from each DRIP yourself.  So I put all the investment information (number of shares purchased, price per share for that purchase, etc.) into Quicken.  I kept the statements I received after each purchase and at the end of the year, I filed away the annual statement of all activity in the DRIP for that year.

Although you can still open DRIPs (and I still have many of the original ones I started years ago), two things have happened to make them less appealing: the costs of DRIPs has generally gone up and the internet revolution has made it much cheaper to invest using an online discount broker.  In many cases the cost of making a DRIP investment is higher than making the same investment at a discount broker online.  I haven’t opened a new DRIP in over a decade.

Where to store fifteen years of financial records

After moving many of my DRIPS to a discount broker, and selling others, I still have a core holding of 16 DRIPs.  An annual statement runs between one and four pages, depending on how much activity took place in the DRIP.  After 15 years, the information on these core DRIPs runs to several hundred pages and grows each year.  If I decide to sell one of these investments, I’ll need these statements if the IRS questions my cost basis.

I could simply leave the records in paper form, but suppose there is a fire, flood, or burglary — well maybe not a burglary since I can’t picture someone carting off these records that would be of no use to them.  Another problem is that if I die without telling my heirs where these papers are located, they might well get tossed out as junk by someone who doesn’t understand their value.

So, not surprisingly I decided to store them in the cloud.  There are two phases to moving paper records to the cloud.  One is the digitizing phase where the papers get transformed into computer files — I chose to save the data as PDF files.  The second phase is to upload the computer files to the cloud.  Converting paper files to computer files was greatly facilitated by my recently acquired Fujitsu ScanSnap S1500.

This is a great document scanner that I’ll describe it in detail in a future CCFF blogpost.  A key characteristic is that it scans at a quoted rate of 20 pages per minute.  So I loaded the 15 years worth of records for one DRIP into the “stacker” and pushed the blue button on the right side.  In less than a minute, a PDF file was generated containing all the data for that DRIP.

The paperwork, converted to PDF format, now was ready to be uploaded into the cloud.  I had to make a decision about where in the cloud to store it.  My first choice was Evernote (see previous blog post).  I’ve been storing the majority of my online notes and documents in Evernote because of it’s great tagging and OCR capability.  But in this case, I really don’t need to search and retrieve information from these DRIP records.  So not wanting to clog up Evernote with information I’d never search for, I decided to more the files to Google Docs.  The total storage requirement for all the DRIP information was less than 60 megabytes, which is only 5% of the total allocation for free users.

It took only a few minutes to upload all the 16 files of DRIP information to my Google Docs account.  What I really enjoyed was tossing all those hundreds of dusty pages into the recycle bin.

A not so obvious advantage of storing in the cloud

Earlier I mentioned the issue that my heirs might not realize the importance of the DRIP (paper) records and toss them out, losing the opportunity to prove to the IRS the cost basis of the DRIPs.  Now that the paper records are gone, replaced by cloud files, how do I inform my heirs of the location of this information?  The solution: make them collaborators on the Google Docs folder containing these files.  Now they have direct access to the folder of financial information right in their own Google Docs account.  Everyone in my immediate family has a Google account, so there is no problem sharing these files with them.  That was one reason why I chose to keep the information in Google Docs rather than in some equally useful cloud space.  I’ll label the shared folder something like, “DRIP info for cost basis”.

Now I think I’ll tackle the mountain of mutual fund statements that I’ve collected over the years!

Retirement Planning in the Cloud

A friend of mine is approaching retirement.  She would like to get an overview of all her investments, both retirement assets and non-retirement assets.  She would like to see how her actual asset allocation (percent is stocks, bonds, and cash) differs from her desired allocation.  A spreadsheet would appear to be the best way to organize her data and make the projections.

The problem is that, while my friend has very good records and knows exactly how many shares of each stock and mutual fund she owns, she has no experience in designing spreadsheets.  Since I have some experience in designing spreadsheets she asked me to help.  But I don’t  have access to her data.  She is willing to let me see her data, but no one else.

I suggested we collaborate together using a Google Docs spreadsheet.  I explained the concepts of cloud computing to her and she decided to create a Google account so she could use Google Docs. Besides the ability to collaborate on a spreadsheet in near real-time, Google Docs had an additional attraction.  It contains functions that can look up the price per share of both stocks and mutual funds.  So my friend only needs to enter the number of shares she owes for each investment and the spreadsheet will look up the current price per share and multiply the two to calculate the current value of each investment.

I created a spreadsheet and made my friend a collaborator.  We both opened the spreadsheet.  She entered the name of the first investment and I could see it on my screen a second or two later (we were talking on the telephone as well).  I entered in the formulas to obtaining the share price for that investment and for calculating the dollar value.  Next I replicated this row several times and she editing the stock symbols and number of shares for each of her other investments.  While I watched these entries pop up on my screen I was entering in the formulas to sum each asset class.  On her screen she could now see the totals and for the first time had an accurate idea of how her assets were distributed.
Next I created a place for my friend to enter her “desired” asset allocation and the formulas to compare the actual asset allocation with the desired allocation.  While I was doing this she was entering in her desired allocation and we both saw how much the actual asset allocation differed from the desired allocation.  The final step was for me to enter the formulas to tell her how much money to move from one category to another so that the actual asset allocation matched her desired allocation.  This is called rebalancing.
The whole process took about an hour.  If we had been emailing spreadsheets back and forth it would have taken days.  Because we could both see what the other was doing in near real-time, if one of us did something wrong the other would notice and comment on the phone.  So we never wasted a lot of time doing things that would have to be redone when the other one saw it.  Real-time collaboration provides huge advantages over emailing documents back and forth.  If you have more than two people collaborating, the advantages multiply.