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Taking a Financial Health Day

Last update on: Dec 20 2018

Most of you are familiar with the concept of a mental health day, when a person takes a day off from work to relax and recharge. Most of us need a financial health day to increase our financial independence and well-being.

There are many relatively simple, easy steps people need to take to improve their cash flow and financial security. The problem is that things that are easy in concept often take time and effort to execute. The financial services industry counts on a level of inertia to maintain its profitability, and barriers to change increase the level of inertia. Even in this age of online shopping and comparison, it’s not easy to change some parts of your finances.

That’s why I recommend that every year or perhaps more often you take a full day and devote it to improving your finances. Instead of trying to squeeze certain tasks in short blocks of time, I find it’s better to decide that’s all you’re going to work on for a full day.

To maximize the benefits from this day, prepare for it. Make a list of the tasks you want to accomplish and do homework. Spend a few hours here and there in the month leading up to your financial health day to organize, get papers and information together, and plan. You want to maximize the achievements of your day and not waste it doing organizational and planning work.

Here are the types of things you should consider doing on your financial health day.

Shop for insurance. Most people overpay or have inadequate coverage for their autos, homes, and other assets. Comparing alternative coverage is a little easier than it used to be, because of the number of insurers that will give quotes online. But not all insurers give online quotes, so you have to call agents or brokers or submit requests over web sites. Plus, there aren’t good aggregation web sites the way there are for travel. You have to visit each web site from which you want a quote and enter all the relevant information each time.

You also have to be sure you’re comparing apples to apples. Ensure that each quote has the same coverage limits, exclusions, deductibles and premiums. For details of the types of terms to look for, review the articles in the Insurance Watch section of the Archive on the members’ web site. Also, seek benefits from combining different types of insurance at the same insurer. If you have time, take a look at life insurance and disability insurance.

Bank and brokerage accounts. Banks steadily increased fees since the financial crisis. If you haven’t taken a look at your bank accounts in a few years, you might be paying too much in fees or not receiving enough services for the fees you pay. Most of my readers should pay low or no fees for banking. Holding a minimum balance, combining different accounts and loans at the same bank, and other moves should result in fee waivers and reductions. It’s best to negotiate with your current bank, but if necessary see what deals are available in the neighborhood. You also can look at alternatives to traditional banking. You might be comfortable with an online bank that has no local branches or doing all your banking through a brokerage account.

Most of the same thoughts apply to brokerages. I’m a big advocate of consolidating investment accounts when possible at the same broker. In addition to fee savings, consolidation makes investing easier and that reduces procrastination. Accounts generally can be linked online to make for easier review and implementation.

If you decide to move to a new bank or broker, that will require a lot of paperwork, and you’ll need a financial health day for that.

Automating your finances. Consolidating accounts also reduces procrastination. You can set automatic bill payments and schedule regular investments. Another way to simplify is to have regular bills, such as utilities, automatically charged to credit cards. This ensures no late payment fees on the accounts and also gives you fewer checks to write per month. It also can make it easy to see how much you’re spending. In the future you’ll spend your time analyzing the bills instead of paying them.

Manage credit cards. Most people have more than one credit card. Under the Dodd-Frank financial services reform, there aren’t many reward programs for debit cards, but there are a lot for credit cards. One way to manage credit cards is to study the reward programs for your cards and arrange your finances to maximize the benefits. For example, some cards give higher rewards for certain types of spending (gasoline, food, etc.) and most place an annual limit on the amount of rewards. When a card has an annual limit you might want to start using it for all purchases for the year until the rewards limit is reached, and then switch to another card.

Refinancing loans. You might have a first mortgage, home equity loan, car loan, and other debts. Take some time to ensure you’re receiving the best deal on your loan. You might be able to refinance to lock in a lower rate or a different loan term. The easy way to do this is to discuss options with your current lenders. If that doesn’t deliver a better deal, you’ll have to take time to contact other lenders to find the best deal for you.

There are other ways to spend a financial health day. Some people work on tax planning or estate planning. Others do long-awaited restructuring of their investments. Of course, you can use the day to work on retirement planning, such as considering the options for when to begin Social Security benefits, the rate at which you’ll withdraw money from your nest egg, or which accounts you should draw from first.

RW December 2013.

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