Thursday, January 23, 2014

Yearly Financial Tuneup

This is almost a duplicate of what I posted last year. It's still a great article, and the ideas are still worthwhile. My additional comments for this year are italicized.
In March of 2010 The New York Times posted an article titled 31 Steps to a Financial Tuneup.  It's still available and is an interactive site, allowing you to check off the ones you finish. It also gives estimated time for each step. I consider it one of the best sites out there for yearly financial planning.
The following list has a couple personal recommendations. Other than that, it comes directly from the New York Times site.
A. If you go to church check your tithing amount.
If you aren't giving ten percent, bump it up a little bit to get closer to the ten percent goal. You should know all the good your church does with the money. If you don't, think about a different church! (~ 5 minutes)
If you don't believe in a personal God, then you're probably on the wrong blog post, but you might believe in karma. Give back to society with at least some of your money.
B. Automate as many bills as you can.
My bank lets me set up automatic payments (note #19 below). Also, I am able to set up most of my accounts so they charge automatically against my charge card, which gives me extra rewards every time I pay my electric bill! The trick is - and this is important! -  pay the charge card off completely every month. If you can't do that, you're living outside your means. Debt is an enemy that will eat you alive.
C. Sell one old thing on eBay or craigslist.
I know. This one sounds silly, and doesn't even sound like a Financial Check-up item, but it's the same as converting something useless into cash. We do it all the time in the games we play. A little extra cash doesn't hurt.
Just do one item. Just one. Every little bit helps.
1. Save 1% more from your paycheck (~5 minutes)
This really works. Even if you can't do one percent, consider a little bit more than you do now. Try to at least match your employer's matching program if you have one; I didn't when I was young - because I was stupid. I lost a lot of money because of that. Don't make the same mistake I did.
Go above the matching program if you can. Anything you can put into your 401K now can benefit you in the future, and it compounds.
2. Reconsider your investments (~30 minutes)
Where are you investing your money? It's even harder now that it was in previous years. Finding a good rate of return on your money is tedious. I'm still looking. If you have good ideas, please help everyone and comment. Make sure you're putting aside for retirement. It sneaks up on you (or eludes you). Trust me on that one. I'm sorry I didn't contribute more when I was younger.
3. Rebalance your investments (~15 minutes, but took me an hour)
It's good to analyze and rebalance these on a yearly basis. I do this every year. My retirement 401k lets me move money between different funds. I analyze the fund performance for the year and make changes. Does it make a difference? I don't know, but it makes me feel better.
4. Find a better bank (~2 hours)
In these years of less than one percent interest, maybe it feels like this isn't worth it. I still check around, though, looking for the better interest rates. Capital One bought ING, and I still have money there, but many of my local banks do almost as well.
5. Make an extra mortgage payment (~5 minutes)
If you have a mortgage, this will help pay it off early and save a lot of money in the process. It's worth it if you can afford it. Your entire financial world changes when you pay off your home.
6. Open a home equity line of credit (~a few hours)
Okay, I don't see the need for this one, but they make the point that you may not be able to open a line of credit if you lose your job. My clever brother has a line of credit and he uses the low-interest of that to fund college for my nieces.
7. Increase your student loan payment (~5 minutes)
Obviously, only if you have student loans! However, make sure you're not paying off low interest loans with money that could be better invested elsewhere.
8. Seek a lower-interest credit card (~10 minutes)
PLEASE don't just get another card. If possible pay off your (only) card every month, and this isn't an issue. However, if you are carrying a balance, ask for a better rate from your current card or seek alternatives elsewhere (but watch out for balance transfer fees). Remember: Debt is a bad habit to get into.
9. Set an automated payment toward your debt (~10 minutes)
They say to set your card for automatic minimum payments from your bank, but obviously I think it should be the entire balance. Making minimum payments is not financially healthy. BUT automatic payments at least avoid the late fees, which will sink your finances in a hurry, so set those up.
10. Read the rules on your rewards card (~15 minutes)
Make sure you're getting all you can get from your rewards. Even if you read them before, read them again since they might have changed.
11. Cash in your rewards (~10 minutes)
Card rewards only lose value over time, since the programs rarely get more generous. Earn them and burn them as fast as you can. I don't do this because I like to have a pool of points for emergency plane tickets, but I'd agree it is a good idea. I used my points last year for plane tickets I needed in February for my Dad's funeral. Now we cash them into pre-paid cards for local stores.
12. Find a better-earning rewards card (~2 hours)
Seek out help from fatwallet.com and flyertalk.com or try the recommendation tool at creditcardtuneup.com.
13. Check your credit reports for free (~20 minutes)
Check one of your three major credit bureaus reports annualcreditreport.com. If you rotate them you can get a different one each year.
14. Consider a financial planner (~1 hour)
Find planners at napfa.com or garrettplanning.com. I haven't done this, but for some people it's a good idea. For others, you can get a lot of benefit from using the resources at Crown Financial Ministries (founded by Larry Burkett). This can be very helpful if you have debt you need to get rid of.
15. Pare part of your budget (~2 hours)
If you can spend the time and energy to do a full budget analysis, that's the best thing. If you can't (and most of us can't) then identify the one or two problem areas for excess spending and consciously cut those back. They say a site like mint.com can help, but so can pencil and paper or a spreadsheet.
16. Read your tax return (~30 minutes)
If you do your own taxes, you must do this. If you have an accountant, check through the return anyway. Talk it over with your accountant. It's worth your time to know what tax breaks you get (and miss). My tax guy missed almost $1000 in my giving last year.
17. Enroll in a flexible spending account (~15 minutes)
Especially in today's economy, use pre-tax money for medical, public transportation or child expenses when you can. We're using the pre-tax medical. Be careful you don't estimate too high, though; you lose the money you don't spend.
18. Reread your will (~30 minutes or more)
If you have one, make sure it still does what you want it to. If you don't have a will, go make one. Check retirement account and life insurance also.
19. Automate your giving (~5 minutes per group)
If you donate money on a regular basis, go ahead and automate it. We do, just because we want less things to remember every month.
20. Walk a loved one through your affairs (~30 minutes or more)
Make sure someone else knows how to find and handle your finances if you die. Write it down so they don't forget. I still need to do this, actually. This involves having the passwords to all our accounts written down and stored in a safe place (like our safe deposit box). 
21. Ask your cable company for a better deal (~30 minutes or more)
In this age of cut-throat services, check your cable costs. Negotiate for better deals or more channels or both. Or change services. We're still trying to figure out how to dump cable entirely.
22. Ask your wireless company for a better deal (~30 minutes or more)
In the same way, check your wireless costs. We changed services last year when our contract was up, saving over $60/month for both phones.
23. Ask your landline company for a better deal (~30 minutes or more)
Getting redundant, isn't it? It's still worth your time to check with your phone company or even consider dropping them entirely for a cheaper VOIP line. We're working on the MagicJack setup right now. Watch out for the Vonage sale though; they have an inexpensive introductory monthly fee, then it jumps up.
24. Spend your gift cards (~20 minutes)
I'm so guilty of this one. I have expired gift cards or lose them and that's just money down the drain. This is the only one where they recommend spending as a good thing!
25. Check your life insurance coverage (~15 minutes)
You should do this every year as a yearly financial maintenance item.
26. Buy a disability policy (~a few hours)
I have one of these, and also make sure it will pay expenses if I'm badly hurt for a few years. It's worth the time and trouble to do the research and get the policy.
27. Consider renter's insurance (~a few hours)
Obviously this is for renters, but it's a good idea. Check it out.
28. Raise your auto and home insurance deductibles (~30 minutes)
Only raise your deductibles if you can afford it, but it does reduce the premium costs.
29. Do a home inventory (~1 hour or more)
I'll just quote NYT directly for this one "Tour your home with a video camera and record everything you’d want an insurance company to replace. Put a copy of the video someplace safe other than a computer, in case of fire or a hard drive crash. And add up the replacement costs for all of those items to make sure you have enough insurance." It's a good idea. I still have to do it.
30. Read your home insurance policy (~30 minutes)
You should do this before you change your deductibles and after you do your inventory. I read mine, but I needed some strong coffee to get through the entire thing.
31. Shop for new home and auto policies (~a few hours)
It's always worth a few hours to see if you can get better insurance deals. Do this before you change your deductibles though, just to be efficient.

Nobody cares about your finances as much as you do. Do what you can to make your finances better this year.