Published May 19, 2021
Withholdings are kind of like The Price Is Right—you want to get as close to that exact number as you can without going over.
Withholdings are kind of like The Price Is Right—you want to get as close to that exact number as you can without going over.
The darling buds of May are in full blossom, and most people are taking some time to shake off the dust and straighten up. When you do, make sure you include your finances. Andrew Busa, JonPaul McBride and Diana Linn take to the mic this week to bring you six steps you should take to make sure your financial plan is up to date, including:
Keeping things trim and on track is even more important for your pocketbook than it is for your perennials. But a few quick tips can keep you in bloom. Click above to listen now and learn more!
Spring is in the air. And that means it’s time to dust off your financial plan with six simple tips that we’ll review in today’s episode. Hello, this is Andrew Busa and I’m a financial planner here at Adviser Investments. And we’re here with another The Adviser You Can Talk To Podcast. So today I’m joined by two of my colleagues from the wealth management team, Diana Linn and JonPaul McBride.
Hey, Andrew, hey JP.
Hey, Andrew how’s it going?
It’s great to have you both here, both CERTIFIED FINANCIAL PLANNERS™, just both fantastic financial planners, really. And you know, guys, spring is in the air. It’s finally arrived in New England, so the urge to maybe clean up your yard, clean up your home might be starting to hit you. Let’s not forget about some simple cleanup that you can do with your finances. And that’s what today’s podcast is all about. Doing some simple spring cleaning around your financial plan. This is going to be a little bit more of a fun little lighter episode. All the things that we’re talking about today though, you really could accomplish them probably over the course of a weekend. These aren’t really arduous tasks, right, would you say?
So true, so true. And it’s necessary, right? We got to clean our house. We got to clean our finances.
That’s it, that’s it. Perfect excuse. So we’re going to be covering six different topics, six parts of your financial plan that we think are worth taking a look at and cleaning up on an annual basis. So the first is your credit score and things around your credit. Second, your employee benefits. Third, cleaning up old subscriptions and some expenses around there. Fourth, literally taking a look at cleaning old paperwork, physical paperwork. Fifth, cleaning up old accounts, maybe consolidating those. And finally, we have a bonus sixth item for you, and that is maybe claiming some found money for you.
I love that one.
So we’ll save that one until the end. Yeah, Diana, that’s going to be yours. We’ll save that for you. Good news. So, but this first one, the credit check and making sure that that’s clean and tidy. JP let’s lead off with this one. I’ll let you take it.
Yeah, yeah. Your credit is one of the most important metrics of your financial health, right? So we’re using it for lending, we’re using it for insurance. We can use it sometimes even for employment, if you’re doing a background check. So it’s important to kind of make sure that it’s being checked regularly, you get a free credit report annually. And when you’re looking at that credit report you want to watch out for kind of those little small mistakes. Credit agencies I hate to say are not perfect. So they’ve been known to kind of make a mistake or two, looking for maybe a late payment that you know was on time.
Or a payment of an account that’s been closed, maybe erroneously. So those are the kinds of those big things to kind of look out for when you’re checking your credit on an annual basis.
Yeah, yeah, for sure. I mean, this is the kind of thing where you think back to your permanent record that follows you in school, right? This is sort of the permanent record of the adult world I think, where this really does follow you around. For the rest of your life could potentially have some big implications on obviously interest rates, insurance premiums. It can effect that for different types of policies. So absolutely important to have that tied up.
Definitely, definitely. And then the good thing about it too is that we want to kind of monitor the credit report annually. But you can also do it daily. You can log onto myfico.com, Credit Karma, mint.com. There’s a bunch of apps out there that allow you to check your credit on an annual basis, on a monthly basis and maybe set up daily alerts. So there’s a lot of ways that you can monitor what your credit looks like, so you’re never kind of caught by surprise.
And how about freezing your credit?
That’s the gold standard. If you freeze your credit, that really kind of puts a stop to any new accounts being opened. It’s pretty easy to do. You can kind of call one of the three credit agencies, so Experian, TransUnion, Equifax, or you can log in online and then use maybe the pin. And they’ll use that pin to kind of unlock all your credit when you freeze it. So if you need to apply for a car loan or home equity, line of credit, something like that, you can always recall your frozen credit.
And importantly, don’t lose that pin when you get it. It’s a little bit of a pain if you do. So, definitely keep track of that. So really I think the summary on this one, two easy steps for you to take. Just at least monitor your credit on an app like a Credit Karma, mint.com. Request your free annual credit reports from the three bureaus and also freeze your credit. I think everyone listening, there’s nothing to lose by doing it. It doesn’t hurt your score to do it. It’s just a little bit of an inconvenience to you, very small inconvenience compared to the potential of identity theft, which freezing your credit protects against.
So, let’s move on to the second item and that’s, Diana, having you talk about some items around employee benefits and also some tax mixed in here as well, right?
Yeah, I’ve kind of got a little mixed bag of employee benefits that I want to tackle here. So one of the things that I like to do at the start of every year is to take a peek at my 401(k). Not only does it feel really good to see this balance grow, but there are a couple of things that I think we need to check on here on at least an annual basis. So the first is we want to ensure that the percentage of our paycheck that we believe is being allocated towards our retirement plan really is. And here’s why I mention this. So this actually happened to me personally, when I first started working here at Adviser Investments, I thought that I could log into my Fidelity.com NetBenefits and make those adjustments myself like, “Oh, okay. I just received a raise. I’d like to kind of tuck away a little bit more into my 401(k).”
And I increased that percentage online. Then when I was looking at my pay stubs, I was like, “Wait a second. These don’t line up. I thought I was putting a little bit more way than I was.” Turns out that I actually needed to request this with the HR department for this to be increased on their end, that the two didn’t speak to one another. So it’s a good thing just to check on, learn from my mistake, make sure that that percentage truly is being pushed aside.
Second, we want to confirm that any employer match that you’re entitled to is also being contributed, and a side note here, at the bare minimum we want to ensure that we are contributing the amount that the employer is matching. So for example, Andrew, if your company is going to match a 100% up to 3% of your salary that you are contributing, at the very least we have to tuck away that 3% into your 401(k). This is free money, and no matter how tight our cashflow is, we can never really turn down free money here, so.
Then the third bullet point item, another reason why we want to check on our 401(k) is these contribution limits change every year. So for 2021 the elective deferral amount is $19,500. And then if you are 50 and older, you can also include that catch-up contribution amount of $6,500. So again, just checking in, knowing your limits and then consider increasing this contribution if you could. So, as I mentioned a moment ago, did you receive a raise or a pay increase this year? Have you paid off a car loan that maybe now you have a little bit more free cash flow? Can you afford to tuck a little bit more aside for retirement?
And then most importantly, we want to ensure, are we on track to meet our retirement needs here? I think it’s worth going through the exercise at least once a year, using a really conservative growth rate to ensure an estimate. What is my balance going to be when I retire? Is this enough? Great. And if not, then we need to make a couple of adjustments.
Yeah, that’s huge. And that’s kind of an entrée to reach out to us for our financial plan, right, Diana?
Nice little plug there, but you’re right, we’d be happy to calculate that for you when we work on your financial plan.
I like that. And I like the point you made about the annual limits, checking in on those, because let’s say you’ve been maxing your 401(k), you just kind of go along with that assumption, you don’t do anything for three to four years. All of a sudden if those annual limits have crept up on you over those few years-
You’re not maximizing it anymore.
You’re not maxing it anymore. And maybe that’s a few thousand dollars you could have in thought you were getting into your 401(k) that you actually weren’t, which will then obviously grow to be a much larger amount on the backend sort of when you’re taking that money out in retirement to your point, Diana. But yeah.
That’s a really, really great example. Yep. And then another important employee benefit item to check on is also your tax withholdings. And I wanted to mention this. We all just went through the payment process of completing our tax prep. And if you have received a large refund, or on the flip side if you owed money, then it’s possible your W4 needs to be adjusted. I know it can feel really nice to receive this nice large refund at the end of the year, but really our goal should be to get as close to $0 tax bill as we can. So we have a wonderful tax team here at Adviser Investments who can help guide you through this, or if you’re more of a do-it-yourselfer, there’s also a withholding estimator tool on the IRS website that can help you make these adjustments. And then if you do determine that a couple of changes need to be made, you would speak to your HR department about adjusting that there.
Yeah, I have a personal story on that one as well, where my wife and I, we did actually go on to use that tax withholding estimator that you just talked about in the IRS, and it helped us out a little bit, going to be for next year’s taxes, just because this year we were a little bit out of balance, more than we wanted to be. So, we did go ahead and we’re going to fill out, refresh our W4s, make sure that our balance is as close to zero as we can get it sort of by the end of the year. That’s I guess the most efficient way to manage your cash flow. Like you said, it can feel nice to get a big check at the end of the year from the IRS, but really you’ve just been lending that money to the IRS interest free over the course of the year if you do that. So again, you want to pay everything that you’re supposed to, but ideally over equal installments over the course of the year.
It’s kind of like “The Price Is Right.” You want to get as close to that exact number as you can without going over.
Right, yep. Yeah, yeah.
And then my final point here on the employee benefits is, you also want to take a moment to just doublecheck your benefits. Do you need to make any changes to your insurance benefits? So if you’ve had a recent life change, have you gotten married? Did you just have a baby? Did you go through a divorce? You may need to make some adjustments to your health and life insurance benefits. Also, take a moment, pull up that 401(k) plan we just talked about. Doublecheck that the beneficiaries you have on that account are the ones that you want to leave the legacy to. And then again, making sure you’re taking advantage of all of the employee benefits that are available to you, flexible spending, dependent care if that’s applicable, disability insurance. So we just really want to optimize there. So in summary, if you are still working, once a year do this double check on your 401(k) contributions, see if you can increase the amount that you’re tucking away. Double-check that W4 to optimize tax withholding, and then take a second glance over your insurance benefits. Sorry, I know that was a lot…
No, that’s really good for the spring-cleaning idea, I think that’s great. And I will just quickly plug, we did do a episode on employee benefits specifically, a whole episode on kind of maximizing those, how to go about that. So we encourage you to go back and listen to that episode if you’re more interested in diving deeper into that topic. But Diana, you hit a lot of the highlights there. So thanks for taking us through that.
JP, going back to you to talk through cleaning up some maybe stale subscriptions, we all build these up over months and months. Maybe during the pandemic, you got a little loose with those. Talk us through that.
Yeah, me too.
Same here. Same here. Yeah, this goes to another episode that you and Diana did, right? The budgeting episode. This is a big budget cleanup item. So when we say subscriptions, maybe it’s an annual fee on a credit card, any recurring charge that you might see on your accounts, this thing that we’re talking about here when we’re saying to review your subscriptions. And also of course, there’s gym memberships, Disney+, then after that you can take stock, reevaluate and see what you really need. So like I mentioned before, Credit Karma, Mint, these are apps that can track your subscriptions as well as reporting your credit. So what I do personally is I look at mint.com pretty much every week to kind of see what’s being charged.
Do I still need that Audible subscription every month? Do I still need that Subscribe & Save for Amazon? (That’s a big one for us with the young kids). Do we need that many paper towels? Really taking stock of what you actually need, what can actually go away? Maybe sharing subscriptions. So in my family I paid for the HBO Max, my brother pays for Disney+, we both save a couple $100 a year, and going to that point of budget cleanup. That’s a couple 100 extra bucks that we can, my wife had to put toward our 529 plan, or toward increasing 401(k) savings back to your point, Diana, from before, where we were trying to figure out what we can do to save a bit more.
Love it. I want to join the McBride family subscription model.
Hey, we have plenty of room, we got another profile waiting for you.
Okay. No, I think this one, it goes to the larger point of just tracking your expenses, not letting that lifestyle creep idea happen, where maybe you’re starting to earn more money. You again accumulate these subscriptions, you never sort of just take stock of what you’re actually using. Again, can you make that monthly cashflow a little bit tighter for yourself and maybe allocate that savings towards somewhere else, or just do something fun with it that you’d rather do?
So, onto the next topic here, this fourth topic that we’ll be hitting. So far, we’ve discussed mostly kind of virtual cleanups around your credit, employee benefits, old subscriptions, let’s get into something that literally involves cleaning. And that’s all the paperwork that piles up over years and years. I’m guilty of that too. So, Diana help me out. How do I fix this?
Here’s where we lose all the listeners, team. They start dropping off. Oh, boy, she’s going to start talking about cleaning the baseboards, but no, but we are–
Nobody has ever done that.
No one has ever done, but we should do once a year. But did either of you watch that Marie Kondo show a few years ago, “Tidying Up” on Netflix?
Yes. And so I really love some of the advice that she gives here in terms of paperwork. And if you didn’t watch that show, her number one tip was the first step is to gather all of your paperwork together in one place, everything, and then kind of divvying it up into three main piles. So that first pile being all the paperwork that you use often and having that in an accessible place. So, that may be having your takeout menus right next to your brokerage account statements if that is what you use frequently, and you have them all together in one place where you can easily grab them when you need to.
Then the second pile is going to be that paperwork that we need to keep, but we use less frequently. So things like tax documents you’re supposed to save seven years. Sometimes you may need to save more than seven years. So speak to your CPA about that. A copy of your will, trust documents. We’re going to have all of that in another secured location. One of my action items for this year is I want to buy one of those fireproof safes to store my important documents like that in.
And then the third pile is our trash. So old bank statements, junk mail, credit card applications. You know, those tax returns that your CPA gives you permission to kind of let go of, and don’t tell my kids, but sometimes a couple of their art projects get tucked into there. We’re going to throw it all out. Speak with your adviser about, we have this wonderful adviser insights portal that we use that has a vault within it. It’s an unlimited cloud storage space. It’s a wonderful place to keep an electronic copy of some of this paperwork that maybe you’re not ready to let go of yet, or a copy of your passport when we can start traveling here again, insurance documents, things of that nature. And then, when you are taking this junk pile, it’s important to shred everything. We recently had a shredder party at Adviser Investments, this big shredder truck come, we had a food truck and it was this big fun event to kind of like free and clear, spring-clean and get rid of those documents. So literally cleaning out stuff here.
That’s right. This is one where your future self will really thank you when you’re going to apply for a mortgage, a refinance. Anything that involves needing to gather up old documents, instead of stressing out over, where is that? I got to email this person to get that. What a good feeling to know where everything is and being able to just pull it up as you need it. So take a little time and just do what you can, chip away at it. I know things accumulate, but, again, the eMoney Vault is a great call-out, too. For the clients who are heavy users of that, I know that they–
Really enjoy it.
… really, really like it for that purpose. So kind of sticking on the theme of accumulating, right? And how this happens over a lifetime. This can also occur with old accounts. Bank accounts, 401(k)s. JP, take us through a process of how we can kind of clean those up.
Yeah, yeah. The lifestyle creep that you talked about before applies to these accounts. So you might have old 401(k)s lying around, old IRAs lying around, and this is something that we often see when we’re onboarding a new client or getting them ready for our financial plan, or getting organized for our financial plan is when we see this a lot too, “Oh, I have this account. I have that account. Oh, I forgot about that. I worked there 10 years ago.” I found an account personally from American Eagle back in the day when I worked at American Eagle. So there you go. I had to kind of like get that consolidated, taking it all the way back, taking it all the way back. So, it’s really important. I mean, it just makes your life easier.
It kind of goes to that single pane of glass. It’s easy to see through one pane of glass, hard to see through two, three, four. So the same theory kind of applies to your financial picture. If you can just kind of reduce the amount of accounts that you have, consolidate them all into one place, if you can kind of see the whole picture really easily.
Yeah. I mean, those financial plans that the three of us I’m sure love doing. We love seeing that nice clean balance sheet where everything is nicely organized. That doesn’t happen a lot of the time.
It will after people listen to this podcast.
Exactly, exactly, and I think a frequent action item that we’ll have out of plans that don’t look like that is to, let’s start to chip away at these other accounts. Let’s clean up this balance sheet so you can just feel organized about it. And also, to kind of project forward for a certain example. When you turn 72, right now you have to start taking required minimum distributions. If you’ve got IRAs all over the place at different custodians that you’ve accumulated over time, it’s going to make that more complicated for you. So, that’s just one example of where consolidating can really help you.
Definitely. Definitely. And even before you get to retirement, it’s just a matter of deploying your assets effectively. It’s hard to invest your total portfolio.
We’ve got one account sitting over here that we forgotten about that, tens of thousands of dollars in cash, whereas you’re all in equities for everything else because you’re really trying to aggressively save for a healthy retirement. So it’s just kind of making sure that all of your money is rolling in the same direction, is kind of the point of consolidate your accounts.
Yeah, that’s fantastic. All right, well let’s get to the sixth item. This is the bonus feature that we promised at the beginning of the episode. We’re hopefully going to help you find some money that is waiting for you out there. So, Diana, how to go about this the best way?
Yeah. And I think this ties in really nicely to what JP was just saying about kind of consolidating your accounts and double checking. He mentioned an account from American Eagle he had forgotten about. So I also want to give a little kudos here to one of our senior portfolio executives, Brad Sharp, for bringing this to mind for everyone. But I think again, once a year we should check for unclaimed funds. You might be very surprised to what you find. So we all live here in Massachusetts. For example, you want to check each state that you’ve lived in. In Massachusetts, we would go to findmassmoney.com, but check all of the states that you have lived in. I did this recently for my parents and for my in-laws. My parents used to live in New York. They live in Ohio now. So I check the state of New York, checked the state of Ohio, and I found a couple thousand dollars for them.
You know, things that you might not be forgetting, a little bit of an insurance that’s left over here, or a dividend from a stock of an account that you moved over that didn’t sweep in. So just check each state’s website and then also be aware that the state’s website is legitimate. As I was starting to prepare for this podcast and going through a couple of things, I was like, “Huh, that doesn’t look too authentic.” So again, reach out to us if you have any questions at all, but it’s worth checking. You might get a free lunch.
Yeah, absolutely. You mentioned Brad Sharp who’s been doing this for clients the last few years. I know he had one client in 2019, literally found $19,000–
Yeah, I remember that.
… that’s a rarity, but those things are out there. And I mean, absolutely go look. The probably more common examples are going to be much smaller than that, but still, just take a second to go look to make sure that it’s not just sitting there waiting for you. So, that’s good stuff. You might be able to use it to pay for that Disney+ subscription. Maybe that–
I know, I know, spring has sprung. We got Disney+ for free now.
We got all our 401(k)s consolidated. I feel energized for spring cleaning. It’s great.
Absolutely, I’m ready to go. So guys, this has been a really great conversation. When you think about takeaways for the listeners, I know we talked through a lot of points, anything jump out at you that you want to leave the listeners with?
I think my takeaway here is I know that it’s that daunting like, “Oh, I got to mop the floors.” But I think if you just set your calendar once a year, so maybe right after you file your taxes, you’re kind of already into the groove. I file my taxes. I check all these action items. Sort of like the smoke detectors, it’s one of those things that I just, I know, like turn the clocks back or I turn the clocks ahead, I’m checking the smoke detectors. It’s just something you’re going to kind of start to put on autopilot. So maybe just whatever time works best for you each year, post tax season or January 1st or whatever mark, just got to do it. You’ll feel better after.
You really will, yeah. It’s like one of those things, if you stay ready, you don’t have to get ready.
I like that.
So the more you can kind of set like you’re mentioning, Diana, set reminders, just, we have a super computer in our pockets now. So we can just figure out all of these things and really set the table for ourselves really easily, which is nice.
Yeah, I like those a lot. And just wrap it up by saying, use your financial planner, use your adviser as an accountability partner. That’ll help keep you kind of on the straight and narrow on that annual basis. As opposed to just doing it yourself all the time you can sort of start to slip up over years and just sort of let things slide. So give us a call if you’re interested in that. If you’re already working with us, great, let’s pull up your financial plan and take a look at that and we can refresh it for you.
Well, this is great. This has been Andrew Busa, JonPaul McBride and Diana Linn from Adviser Investments, thanking you for listening to The Adviser You Can Talk To Podcast. If you enjoyed this conversation, please subscribe and review our show, and you can also check us out at www.adviserinvestments.com/podcasts. Your feedback is always welcome. And if you have any questions or specific topics that you would like us to explore, please email us at email@example.com. Thanks for listening.
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