Presented by Jonathan S Merckens, CFP Spring is in the air. As the flowers come into bloom and the temperature ticks upward, you may experience a feeling of renewal. That’s often what spurs people to do their spring cleaning—and it’s a great idea. But while you’re at it, why not do some cleaning in your “financial house,” too? Even if you recently took a look at your finances as you prepared for tax season, there still may be some
items that could use attention. The following list touches on five commonly neglected areas.
Review the terms and conditions of your credit cards. Legislation that took effect in July 2010 caused credit card companies to alter their business practices. Across the board, interest rates have increased and some credit limits have dropped. In addition, some card companies have begun to charge additional transaction fees and implemented
new service charges. These seemingly small changes can add up to real money, so you want to be aware of them.
You were likely notified of any changes impacting your cards, but if you’re like many people, you probably didn’t pay much attention to the notice you received. While card companies must disclose changes to their terms prior to enactment, it’s your responsibility to review the terms (or the notice, if you didn’t throw it away immediately) to stay
informed. You may also find them on your bank website or obtain them by calling its Customer Service department.
You may discover that you’re not happy with the new terms of some cards. Your first instinct may be to terminate the agreement, but be careful about hastily closing accounts. This can lower your credit score, especially if you close older accounts with lengthy credit histories. Rather than close an account, use the card for small purchases and pay off the balance quickly. This will maintain your credit score and keep the card company from closing your account for nonuse. In some instances, you may be able to negotiate better terms. Check with your bank to find out.
Bank fees and services
Banks have new rules limiting what they can charge for certain services (e.g., overdraft protection and fees). As a result, many have instituted new charges or increased others to make up for potential profit loss. Your bank may have quietly announced some new or
higher fees that you may not be aware of. Of course, it’s a good practice to read all bank notifications carefully, but you can catch up now by looking into whether your bank has instituted or increased:
• Monthly maintenance charges
• Check and deposit return charges
• ATM/electronic fund transfer fees
Review every account, even if they all reside with the same bank. The terms can vary from institution to institution and from account to account within the same institution.
Credit report and score
A good credit rating can be critical. Businesses inspect your credit history when evaluating your applications for credit, insurance, employment, and even leases. With so much in the balance, it is important to check your credit report for accuracy at least annually and to watch for credit fraud.
Fortunately, it’s easy to check your report, as you are entitled to one free annual report from each of the three major credit reporting agencies— Equifax, Transunion, and Experian. You may consider using a website such as annualcreditreport.com to gather this information, but be sure you choose a site that doesn’t charge you for the report itself. You may also use a credit monitoring service or site, but be wary of the terms of service.
Take the pulse of your investment accounts regularly. This includes reviewing your insurance policies, annuity contracts, retirement plans, and educational savings accounts. Are you on track to achieve your goals? Do you need to make adjustments? Discuss your investment allocation, risk tolerance, and objectives with your financial professional.
If you don’t have one already, starting an emergency fund should be on your spring cleaning to-do list. The standard is to have three months of expenses readily available in case you and your family encounter the unexpected (e.g., job loss is the most common unexpected event). Because it may take longer to find employment or to recover from a
financial setback in the current economic environment, if you already have an emergency fund, you may want to increase your savings to six months of expenses.
Everyone’s fund varies, based on the particular situation and on factors such as:
• Family size
• Current debt
• Insurance coverage
By planning ahead, the smaller emergencies (e.g., replacing a broken hot water heater) can be easily covered. Remember, it’s far better to have an emergency fund and never need it than to experience the reverse scenario.
These financial spring cleaning to-dos will take some time, but having them checked off your list will free you up to enjoy the season. You’ll feel more relieved, knowing that you’ve taken some important steps in helping to secure your economic future.
Jonathan S Merckens is a financial planner practicing at 1287 Ridge Rd, Ste. B, Hinckley, OH 44233. He offers securities and advisory services as a registered representative and investment adviser representative of Commonwealth Financial Network®, a member firm of FINRA/SIPC and a Registered Investment Adviser.
Contact him at (330) 591-9311 or Jonathan@GrahamAssoc.com.
© 2011 Commonwealth Financial Network®