Summer is right around the corner and most of us have our to-do-lists figured out, mentally, if not written down yet. Bible camp forthe kids, plant a large garden, and a trip to the lake. What aboutfinancial housekeeping, shouldn't that be on your list too?
Early summer is a great time to take a financial breather. Theholidays are a long way off, the taxes have just been paid and we'respending time eating in the backyard instead of dining out.
If you take even one day out of your summer play/work and organizeyour finances, you could cut down on the forest of bills, bankbalancing, and paperwork facing you all year long. Now is even a goodtime to take a look at your retirement and investment accounts andcheck up on your insurance coverage.
Getting Started
Starting with your bank papers, check out how many savings andchecking accounts you have and minimize them. I like to have twochecking accounts for the house, one is used only for the regularbills and the other is for household items and irregular spending.Two savings accounts are enough as well, one for long-term saving andthe other for short-term.
Another time and paper saver is if you set up an automatic depositof your paycheck into your checking account, and then set up anautomatic payment from your checking account into your savings,investment, or IRA accounts. Even if you pay yourself only $10 aweek, it adds up over the year and is a good discipline to learn. Youcan even use automatic deposits to save money for Christmas presents,a vacation or other "special occasions".
If you are technologically savy and comfortable with the idea ofelectronic payments, consider using e-payments to pay your regularbills, such as mortgage, electric, or car loan. Don't let thecompanies do electronic with-drawls for you. How do you guaranteethat they took the right amount, and if they made a mistake (whichhappens) how do you get the money back? It is a lot simpler andpotentially safer for you to do an electronic bill-pay through yourbank.
Another step
In 2001 the Economic Growth and Tax Relief Reconciliation Act madeit easier for you, the investor, to consolidate your retirementaccounts and still retain the tax-favored treatment of the money.Prior to this act, advisors frequently told their clients to keepretirement accounts separate to save on taxes.
Now you can take eligible distributions from tax-qualified plans,403(b) and 457 pension plans and other types of plans like the IRA,and roll the money into other tax-qualified plans. The purpose hereis to consolidate your multiple plans into one or two accounts.This'll make it easier for you to keep an abreast of what your moneyis doing. With fewer accounts, you'll have less confusion, hopefullyeverything is on one statement and if you have questions or need tomake changes you only have to talk to one representative.
Coverage Checkup
Instead of merely simplifying your financial life, you should alsomake sure that you are providing adequate protection. It is a goodidea to have insurance on your home, your health, your car, yourloved ones, and your income. Don't forget, though, you can over do itand have too much insurance. You need to decide what level of self-insurance you are comfortable with.
The law requires you to carry automobile liability insurance isrequired by law. At the least you should have term life insurance toreplace your income and help your loved ones with debt and livingexpenses. Homeowner insurance is important in case your home becomesunlivable due to fire or other incident.
Again, if you can get your insurance through one provider, yourlife will be simpler with fewer agents to visit with. Perhaps you caneven have access to your account through the Internet. The lesseffort it takes to understand your coverage and to make changes, theless stress and the more time you'll save.
Final Items
When was the last time you updated your will? If it was more than ayear ago, you might want to do it again. Assets increase or decrease,potential inheritors are born, and maybe you've decided that you'dlike to leave a little something to your church. Updating your willis a good way to make sure your final wishes are carried out.Putting some of your assets in a trust can save on probate costs.Also if you become incapacitated the trust can manage funds forpeople with special needs - a child who needs extra care, forexample. A trust is also another way distribute your assets tochildren or grandchildren at a specific age, such as when they reachage 25 or have children of their own.
Ultimately, you will have to decide just how much consolidation ofplanners, agents and financial management you want to do. Once you'vecleaned house on your finances, spending an afternoon in the hammockwill be a lot more restful. Having a peace of mind about yourfinancial affairs is truly a good feeling.
Roger Sorensen
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