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Personal Finance FAQ

How to Spring Clean Your Finances

  1. Why is it important to check in with your finances quarterly or biannually?
I’m a fan of bucketing your check ins with your finances:
  • Monthly: Check your checking and credit card accounts. What you’re looking for are a couple of things. First, you want to make sure that you’re not spending beyond your budget, which I recommend making on a monthly basis. Second, you want to check to make sure that there are no unrecognized charges or transactions in these accounts. While you have limited liability on them, particularly with credit cards, you don’t want a hacked account to linger without reporting it to the proper financial institution.
  • Quarterly: Check your credit report. We’ll get into what you should look for in your credit report, but, you should be able to get a credit report for free once a quarter.
  • Annually: Look at your investment accounts. Once a year is the time to rebalance your asset allocation and make sure that you are setting enough aside on a regular basis to meet your retirement goals.
  • Is now a good time to consider refinancing student loans or mortgages, or consolidating credit card debt?
  • If you can get a better rate on your debts, then you definitely should refinance those debts. Be careful with refinancing your mortgage, as some lenders charge fees and points on the refinancing that may make it more expensive to repay the mortgage than if you had not refinanced. If you can, try to throw a little extra at your debts, as repaying your debts is a guaranteed rate of return.
    Shop around for rates. I look at bankrate.com and creditcards.com to see what rates are when I’m doing debt analyses. Your goal should be to get your debts paid off as soon as possible instead of kicking the can down the road, but lower interest rates will help you accomplish that goal.
    Additionally, if you have a home equity line of credit and you are experiencing financial hardship as a result of the coronavirus pandemic, you may want to think about drawing down that line of credit, as some banks are tightening credit currently.
  • If someone is reviewing their credit reports right now, what are the most important things to look for?
  • The most important thing to look for in your credit report is whether or not there are inaccuracies on your report. I don’t mean a difference of $200 on a credit card balance. What I mean is if there are incorrect reports of delinquencies, or there are accounts on your credit report that you did not open. If you find these, dispute them with all of the credit reporting agencies. If you find that there are accounts that you did not open, you’re also going to want to look into identity theft and make sure that has not happened to you.
  • What are your best tips for lowering bills? For example, how can someone get lower rates on utilities or save money on car insurance?
  • A lot of car insurance companies are providing refunds because people are driving less during the coronavirus pandemic. If you’re one of the people who is now working from home, log your mileage on your car. Take pictures so that you have documented proof that you’re driving less, and use that information to renegotiate your rates on your insurance. Also, shop around. Just like with your mortgage and credit cards, call around and see who can offer you the best deals. If you have cable, strongly consider cutting it and going purely streaming. For cell phone and home internet, see if you can get a bundle deal, or consider going to Google Fi (#aff) for your cell phone. Finally, if you are a renter, see if you can negotiate with your landlord to lower your rent in exchange for a longer term lease.
  • When reviewing savings and retirement accounts, what are the most important things to consider?
  • I like for people to think about a few things when they look at their accounts that will help them achieve their retirement goals:
    • Are they contributing as much as they can to them? To some extent, saving for retirement is a brute force exercise. The more money you can put into your retirement and investment accounts, the better off you’re going to be in the long run. Few people have the luck or acumen to invest in Google at the IPO and hang on for 20 years. So, rather than trying to pick the winning lottery ticket with our investments, we’re better off trying to save as much as possible.
    • Are they maxing out their retirement contributions when they can? If you’re under 50 and have earned income, you can contribute $6,000 to an IRA. If you’re 50 or older, you can contribute $7,000 to an IRA. If you have an employer sponsored retirement plan at work and you’re under 50, you can contribute $19,500; if you’re 50 or older, you can contribute $26,000.
    • Are they investing in low cost funds? Fees matter in your returns. Every dollar that you spend on a commission or on a 12b-1 fee in a mutual fund is a dollar that you don’t have. Avoid load mutual funds and funds with high 12b-1 fees. Go for low cost funds wherever possible. I’m a huge fan of Vanguard funds and am personally invested in their index ETFs.
    • Are they diversified appropriately? You want a broad exposure to stocks and some income generating investments. My general rule of thumb is that the percentage of your investments that you want in stocks is 110 – your age or 110 – the age of the older spouse if you’re a couple. I’m a fan of low cost index funds to try to cast as wide of a net as possible.
    Jason Hull is a Dallas, Texas based Certified Financial Planner and runs Hull Financial Planning.

    By Jason Hull, CFP®

    Jason Hull, CFP®, was the co-founder of Broadtree Partners, a firm that acquires $1-5MM EBITDA companies. He also was the co-founder of open source search consultancy OpenSource Connections, a premier Solr and ElasticSearch firm. He and his wife FIREd (financial independence retire early) at 46 and 45, respectively. He has a BS from the United States Military Academy at West Point and a MBA from the University of Virginia Darden Graduate School of Business.

    You can read more about him in the About Page.

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