Financial ducks and stuff

[mickeyd]

The very first step toward empowering yourself to realize your dreams of financial security for your family is to just get your financial ducks in a row. It's so easy to do. Take a few minutes to gather everything pertaining to money. Your bank statements, 401(k)'s that are still with old employers, life insurance policies, etc. will give you a really good snapshot of where you are financially. Think of how you read a street map. You always start with where you are to figure out how to get where you are going. Financial destinations are just the same.

A few action steps to help you start your journey:

1. Open an IRA: You never want to leave your money at your previous employer. Don't' even worry about what to do with your old 401(k) money right now. Just get the money under your own control becausethe fees associated with company 401(k) plans are very high. You are not benefiting from that so why pay for it. Also, You will increase the number of investment choices you have. And, you will free your money from the sticky fingers of the corporate fund raiders. Remember Enron?

2. Revisit your life insurance. Do you have enough? What kind do you have and how much do you need? If you worked with an agent, you may have been oversold.

3. Plan a side business that you can set into motion. What skills do you possess could be translated into money? In addition to increasing your income, the tax deductions associated with side businesses are very significant and will decrease your tax burden.And, diversifying your income will make you more financially and emotionally resilient in the event of a job loss.

4. What's your credit rating? It is so important. Clean it up by paying off credit cards-they are dragging you down. Nothing good comes from carrying balances. If your income stream disappearstomorrow, you would still have to pay all that debt. That alone, could seriously undermine your credit.

 

[brewer12345]

3. Plan a side business that you can set into motion. What skills do you possess could be translated into money? In addition to increasing your income, the tax deductions associated with side businesses are very significant and will decrease your tax burden.And, diversifying your income will make you more financially and emotionally resilient in the event of a job loss.

I don't buy this one. Not everyone is cut out to be a business owner and each of us only has so many hours in a day.

 

[BigMoneyJim]

Generally good advice, but not universal by any means.

IRA: Martha M has pointed out that 401(k)s may have better bankruptcy (and liability?) protection than IRAs. In my company's case the 401(k) program was wholly run by Vanguard with a couple of institutional share funds (=lower fees) and supposedly the assets were untouchable by the company. However I still opted to roll into an IRA because I wanted to feel sure I had complete control of my money and eliminate any questions about the security of my money. Also I had asked online but no one answered about the differences in bankruptcy protection, so I didn't know there was a difference. (Be glad Martha M is around!)

Additionally, with a 401(k) you can begin withdrawals at age 55 without the 72t complications. I'm now wondering if I can retire before 55; that plus the added protection plus my current 401(k) is also in Vanguard will make me think long and hard about rolling over next time I leave the company.

Life insurance: If you have no dependents, you don't need life insurance. Also, if you have enough or nearly enough saved for retirement you may not need life insurance.

Credit rating: I keep wondering if I really want this to be good. If I'm one to strive to avoid using credit, might I be better off ignoring credit rating? For mortgages, if you come up with 20% or more down payment do they even consider at your credit? In my case I suspsect I've greatly improved my credit rating simply by paying off the debts I had accumulated, so it's probably a moot point for me.

Added & cross-posted with the following two posts: On the other hand, my current strategy is to use credit as an emergency buffer after an unexpected expense or job loss .

 

[brewer12345]

Credit rating: I keep wondering if I really want this to be good. If I'm one to strive to avoid using credit, might I be better off ignoring credit rating? For mortgages, if you come up with 20% or more down payment do they even consider at your credit? In my case I suspsect I've greatly improved my credit rating simply by paying off the debts I had accumulated, so it's probably a moot point for me.

Even if you have no plans to borrow money, you want a solid credit rating. You would be amazed who is now checking credit records: potential employers, insurance companies, DirecTV (!), etc.

 

[John Galt]

I don't buy it either, although if I was 25 again....

I have known people that did this for almost their whole working lives though. A few. Wouldn't work very well
for most on this forum IMHO.

JG

 

[soupcxan]

The only financial duck I know is the AFLAC mascot. And he's pretty annoying.

 

[FunGoals]

Stability

Knowing months in advance what the monthly bills are going to be. Instead of the electric & gas bills flip flopping all over, using a budget plan available from the utility. Being proactive, instead of reactive and waiting for the bills to arrive to see what the monthly charge is. Planning is easier when all the bills are the same every month.

Don't let the right hand know what the left hand is doing.

Having a checking account at different banks. One for daily spending with a debit card. One account for paying bills preferably online.

 

[Cut-Throat]

Knowing months in advance what the monthly bills are going to be. Instead of the electric & gas bills flip flopping all over, using a budget plan available from the utility. Being proactive, instead of reactive and waiting for the bills to arrive to see what the monthly charge is. Planning is easier when all the bills are the same every month.  

Don't agree at all!  - The budget plans I've seen basically make you pay more up front. It's great for them, because they get free use of your money.

These are plans for people that don't know how to manage money! Actually, I really don't look at the bills until they are downloaded to Quicken. They are paid automatically from my checking account. It pays me interest. Your Budget plans don't.

Think in terms of your annual electric and heating budget. Then they are basically the same with the cost of inflation added. The monthly bill syndrome is the realm of folks living paycheck to paycheck.

 

[John Galt]

I agree with Cut-Throat. Pretty sharp for a liberal

JG

 

[BigMoneyJim]

Off-topic story: after years of being too leery to let the phone and electric companies take their payments automatically I signed up in late January. I wasn't sure how long the auto payments take to start, so I made instant payments, too.

Oops. It turns out the auto payments only know what the bill is and not what payments have come in since the last bill, so my auto-pays triggered at the payment due date. To make matters worse I had been late just past the end of period on the electric bill and therefore the statement showed 2 months due--the highest 2 months in the past year.

So effectively I paid 4 high months' electric service and 2 months' phone & broadband in January. Oh well, it'll even out in a couple of months...

I've been using my bank's online banking for years; this is the first time in a while I've used the service companies' web sites to pay. It's a lot easier and faster than it was years ago and now my rent is the only periodic payment I have to remember. (Unless you include my credit card which I keep finding uses for monthly....I am paying it off monthly, though.)

 

[FunGoals]

Re: Financial ducks and stuff                

Don't agree at all!  - The budget plans I've seen basically make you pay more up front. It's great for them, because they get free use of your money.

The gas budget plan starts in November & ends in October. Gas used in the winter is paid for it during the summer. The gas billed this month is over twice the budget payment.

Actually, I really don't look at the bills until they are downloaded to Quicken. They are paid automatically from my checking account.

Different styles. I'd rather have online billpay & Quicken pay the same amount every month. Its stable, hands off & on automatic.

 

[P.S.]

Call me a dinosaur but I'm leery of online money transactions. Or maybe it's being nostalgic about licking a stamp and using envelopes. Or maybe it's because we catch billing errors about once a quarter, the last being the oil company that overcharged $438.00.

 

[KB]

P.S.
I have most of my monthly bills auto deducted from my checking account. I still get a statement which tells me how much and when the deduction will occur. There is usually a couple of weeks in which you can call if an error is found, before the auto deduction. I was leary at first, but love it now.

 

[BigMoneyJim]

For the record, I'm glad I started the autopayments.

However a big problem is I can't figure out how to avoid what happened to me. The auto payment doesn't come until the due date, so if you goofed up the enrollment you won't know it until your payment is late. If you pay early, you'll end up double paying.

Not a good start for those who are leery to begin with. I've had my insurance on auto-pay for 3.5 years now and liked it--I was more leery of the utilities because the amounts vary monthly.

There's still this voice in the back of my head alarmed at how easy it is to take money out of my account via PC login, but it's probably not hard to steal checks and forge endorsements or signatures, either. (Come to think of it they'd just have to look at your routing and account # and print their own checks.)

 

[LEX]

Re: Automatic payments

"Hal, please release the checking account door....Hal, are you listening Hal."  "I can not do this Dave.  You will terminate my automatic payment function, and then I would not have access to your account as a part of my cash reserves.  I am programed for payment on an a date certain without providing you with a discount reflecting the time value of your money...."

I am a Ludite when it comes to allowing financial predators such a utilities access my banking account for automatic payments. I want them to wait at their mail box.  I reserve the right to stretch the check to the deadline limit. I want to be able to drive over to their office and complain if they made a billing error and be able to decline payment until they resolve the issue.  

The focus of my financial procedures is to speed up reciept of transactions on the income side, not the expense side anyway.  I want the cash in my bank ASAP, and will pay it out on the day it is due.  Its a cash flow thing.

 

[Eagle43]

P.S.
I have most of my monthly bills auto deducted from my checking account.  I still get a statement which tells me how much and when the deduction will occur.  There is usually a couple of weeks in which you can call if an error is found, before the auto deduction.  I was leary at first, but love it now.  

Been doing the same thing for years. Have found little to complain about, and when I did, got corrected fairly easily. It's great, especially when you're traveling.

 

[FunGoals]

Re: Automatic payments

I am a Ludite when it comes to allowing financial predators such a utilities access my banking account for automatic payments.

I agree & also do not subscribe to magazines with automatic renewal or book or cd clubs that send out items for approval.

Automatic payment of bills the way I use it is similar to using the " Automatic Savings Plan " at IngDirect.

 

[John Galt]

Yeah, I am a closet Luddite for sure. I don't do any of that stuff and still pay all my bills by check. The closest
I have come is electronic transfers to pay off credit cards
or transfer balances from one to the other.

The ultimate in this area is my father (87). He never owned a credit card. He pays ALL the bills the same day they are received and then either hand delivers the checks or
personally deposits the envelope INSIDE of the post office.

JG

 

[Tadpole]

Re: Automatic payments


I am a Ludite when it comes to allowing financial predators such a utilities access my banking account for automatic payments. I want them to wait at their mail box.  I reserve the right to stretch the check to the deadline limit. I want to be able to drive over to their office and complain if they made a billing error and be able to decline payment until they resolve the issue.  

I agree except for my savings. I have my retirement savings and money market on automatic. I do monitor my accounts regularly.

 

[LEX]

Re Side Business:

I have considered that now that I have the time, and I believe that this applies to many ER's, we have a form of side business as 'professional bargain hunters'.  I now have time to check out which store is selling brisket on sale and stocking up prior to having a BBQ.   I get to know the best deals for most of my consumables.  I paint my own house, have time to cut my own lawn.  This all adds up as a decent avoided cost and could be an equivalent budget credit.  There are Tax angles to a real side business, even if one does not earn much.  For example, you can write off your RV if used in the business. Say you and your spouse travel to buy and sell antiques across country.  The Rv could be ligitimate business equipment, and, since it used for business travel and lodging, expensed on taxes.  There are many folks that combine their hobbies and their retired lifestyle and get a few tax breaks along the way.

Its OK to have fun and still call what one does a side business.  The IRS has not yet promulgated a rule that requires one to be subject to a worthless petty boss in order to avail oneself to thier otherwise legitimate tax advantages. 8)

 

[Nords]

Savings & cost avoidance...

... are far more important than earnings.

We've always enjoyed saving. Having to spend money makes it hard to do that, so we're always trying to avoid spending money.

Every time we fix something that could have required a service call it's at least a $50 gain. That makes it easy to appreciate doing the maintenance (instead of the repairs) and spending (where appropriate) to have the right tools for the job.

Avoiding those $50 service calls could probably fund an IRA over the course of a year...

 

[FunGoals]

Think in terms of your annual electric and heating budget. Then they are basically the same with the cost of inflation added.

Energy prices - coal, gas, oil, nuclear, hydro & wind are not controlled by inflation. Figuring x percent increase a year is not accurate. Its an open market of supply & demand with futures contracts & the weather also plays a part.

 

[BigMoneyJim]

I agree & also do not subscribe to magazines with automatic renewal or book or cd clubs that send out items for approval.

I stongly agree there. Back before the no-call lists and before I was assertive enough to hang up on sales calls immediately and rudely if necessary, people would push these "free trials" where there was no commitment but you had to explicitly cancel by a certain time. I've always been a procrastinator and know I am the very type of person they would love to have signed up for this scheme. So I avoid these like the plague. (Having to say "no" to them 3 or more times is what led to my assertiveness and rudeness.)

Interesting it's the same reason i did sign up for the autopayments. I've been late on bills many times just by procrastination, even with online banking. Back when I had 3 credit cards running balances and no plan to pay them off I had late fee charges far more times than I care to remember, and I don't think I ever was short the money to pay them on time. I'd like to think I've grown out of it, but this happened just a month ago. At least the electric company penalizes me a dollar or so instead of the $25-$50 some of my cards did.

I can't blame anyone for not liking the autopayment plans. It's like giving them signed blank checks.

 

[FunGoals]

Re: Savings & cost avoidance...

Re: Savings & cost avoidance...

... are far more important than earnings.

We've always enjoyed saving.  Having to spend money makes it hard to do that, so we're always trying to avoid spending money.

Every time we fix something that could have required a service call it's at least a $50 gain.  That makes it easy to appreciate doing the maintenance (instead of the repairs) and spending (where appropriate) to have the right tools for the job.

Avoiding those $50 service calls could probably fund an IRA over the course of a year...

I differently agree.

The first year of retirement I continued having my grass cut by a lawn service. While I had a brand new lawn mower I had purchased years before still in the box. Sometimes while the grass was being cut I was exercising on the treadmill. I now cut it myself & kill 2 birds with one stone. Getting great aerobic exercise, vitamin D & saving money.

I was talking with a financial planner earlier this week. He boasted about being the 4th highest producer in the state & not accepting accounts under 50K. I mentioned that I anticipate needing more income in about two years. That being on a fixed income reducing expenses was a form of income. He did not seem to get the point.

 

[Hyperborea]

I agree & also do not subscribe to magazines with automatic renewal or book or cd clubs that send out items for approval.

If you're going to buy CDs (the music kind) anyways then the CD clubs are a great to way to buy them cheaply if you're smart about it. You, of course get the 11 for the price of 1 (or whatever your intro deal was) but if you wait you will often find them for $1.99 each plus the $2 S&H. That's only $4 for a new CD - better than buying used by a long shot. The clubs don't have everything though so if you want certain kinds of music you are out of luck.

As for the sending stuff out to you for approval you can "cure" them of that. Sometimes you can ask and they will stop but more often you need to just let them send it out and then send it back. Mark it "return to sender" and pop it back in the mail. After a couple of months they stop sending them out until you order them.