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I'm sure we all have been in a similiar situation. Losing a website due to a server crash or human error is not fun
Here's my method:
I use XOOPS Backup and Restore for my databases and perform regular backups that I download and burn to CD. I use a Backup program that allows me to download files from an FTP to backup my site files. I have it set automatically to backup every night while I'm sleeping; twice a week a full backup, other nights are incremental backups. And I burn them to a CD. And because I'm REALLY cautious, once a week, I take a disc to a safe deposit box, in case my house burns down
But I have client work I also do this with, so it's well worth the trip to the safe deposit box
I do this even though my web hosts insist they backup daily. It's just added security for me
Different people have different methods, but this works for me.
Practice the method of backing up...you'll be glad you did