Spring Cleaning

A few weeks ago I traveled down to Maryland to visit my sister. What I thought was going to be a relaxing weekend, where my sister would feed me good food and wine (she’s in wine sales), turned into an exercise in intense spring cleaning. I wish it was the spring cleaning that involved cleaning gutters and planting flowers; instead, it was the spring cleaning that involved getting her financial house in order. Unfortunately, her financial house was in quite a state of disrepair. What came out of this project, though, is a good list of things to review to get your financial house in order.

·         Go paperless. Any bills and statements that can be delivered paperless, sign up for it. Get rid of the overstuffed folders and envelopes sitting in a drawer or on your kitchen counter. All of these statements (old and new) can be accessed online.

·         Ask your tax preparer if he or she keeps electronic copies of your tax returns on file. Most accountants recommend saving the last three years of returns, in case of an audit, but that doesn’t mean you need to save the hard copy. Save a copy on your computer or external hard drive.

·         Sign up for auto bill pay. Most companies now have the ability to set up auto deduct from your checking account. You don’t have to worry about missing a payment and being charged ridiculous interest rates. Personal note: I only use auto deduct for bills that are similar each month; phone, cable, mortgage, car, etc. . . . Credit card bills I will set up manually because that usually involves figuring out cash flow timing.

·         Credit cards—this topic could be an entire post in itself, and in full disclosure I am not an expert here. My feeling is less is more, meaning reduce the amount of cards you have in order to maximize what you are receiving in return. Get rid of the cards with high annual fees—what are you really getting for those fees? Airline frequent flyer programs are changing: whereas you used to receive points for every mile you flew, Delta recently changed its program so now points are earned for the amount you paid for the ticket, not miles flown. So that flight to Detroit from New York that used to earn 600 miles may only earn you 279 now. Personally, I am becoming more of a fan of the cash back cards—you know what you get, and cash is king, right?

·         If you are not set up for direct deposit of your paycheck, you should be. Most employers now have the ability to direct deposit to other accounts, not just your checking, such as a 529, savings, or investment account. My feeling is the more I direct money to these other accounts that are working for my future goals, the less likely I am to spend it today on frivolous items like new sneakers or a bike. With two children in college, I cannot repeat enough: save for college.

·         When was the last time you reviewed your 401k plan at work? Now is a great time to review and more importantly rebalance your account. The stock market has been up for the past few years; check if your allocation is in line with your goals and risk tolerance. Most plans have an auto rebalance option that you can sign up for to have your account rebalanced quarterly, semiannually, or annually. Sidebar: in that folder with a copy of your 2010 401k statement, check to see if there any old 401k’s hanging around from former employers. You can probably roll them over to your IRA (call me) or possibly your present employer’s plan. Make sure your beneficiary information is correct. If you are divorced, you should update this information to reflect your current situation. Wouldn’t it be a shame if your ex-spouse inherited your 401k or IRA instead of having it go to your current spouse or children?

·         Review your will. A lot has probably changed since you had it drafted. Make sure your beneficiary and trustee designations are correct. Do you have a health care proxy or health care agent who can make decisions for you if you lose the ability to make these decisions? Consult with your attorney to make any changes.

·         Review your life, home, and auto insurance policies to ensure the correct people are listed as beneficiaries. Make sure that you have enough life insurance coverage too. Chances are your financial situation has changed since you bought your policy (also, call me).

I know this is a long list and may seem daunting, but you can get through it in an afternoon. My sister felt really good and much lighter after shredding two garbage bags of paper. It is really a liberating experience; it’s amazing how much stuff we jam into that filing cabinet or milk crate.

This blog is as much about offering up ideas and thoughts to help you as it is an exercise to help me live my life more simply. Life can be chaotic and challenging at times. By bringing order and reducing the stuff we have, we can live simpler and better lives.