Kevin Kautzmann, CFP® quoted in Forbes
Practically Painless Guide To Managing Money
In our time-starved lives it can be tempting to give our finances short shrift. People are juggling multiple checking, savings, investing and credit card accounts, and it gets more complicated when you add mortgages, tax and insurance concerns into the mix. Each of these comes with an abundance of deadlines, mail (both junk and legitimate), statements and stress. It can seem easier to pretend none of it exists.
“No one wants to spend lots of time on financial chores, so your best bet is to create a good system for getting the ones that matter most done fast,” says Laura Vanderkam, time management expert and author of 168 Hours. “This way you can focus on other things, like earning your money and putting it to good use.”
The best way to tackle your personal finances with the least time and energy is by creating a system of daily, weekly, monthly and annual tasks to complete on a schedule, she advises.
–For one month keep a daily log of your spending habits and track how much you spend on such items as coffee, newspapers, food and cosmetics, says Michael Kay, president of Financial Focus in Livingston, N.J. “After several weeks, you’ll be more aware of what you spend and [learn to] make better choices. He finds this approach particularly helpful in pinpointing wasteful spending habits such as “emotional point-of-sale-items purchases.”
–Set up a filing system for your mail, and sort bills according to due dates.
Choose the same time on a specific day of each week to:
–Go into your filing system and pay all outstanding bills in that week’s “accounts payable” file.
–Create a weekly spending plan based on your daily tracked expenses, then check your spending against the plan weekly. “Once you know what’s coming in and going out, you’ll be in a better position to spend more wisely from week to week,” says Cate Williams, vice president of credit counseling agencyMoney Management International.
Mark the same date of each month on your calendar as a money day, and use it to:
–Check your credit card statements. “Mistakes do happen, and you’re the only gatekeeper,” says Carrie Schwab Pomerantz, president of the Charles SchwabFoundation.
–Check on your monthly contributions to your 401(k), IRA or brokerage account, and make note of whether the sum has been taken from your account or paycheck.
Check in with your financial advisor:
–Call your financial advisor at least once every three months, advises Kevin Kautzmann, financial planner with EBNY Financial in New York. “I have clients who look at their brokerage statements every day–and one of them is my mother,” Kautzmann says. “That is absolutely crazy. But if funds are out of balance, they should be adjusted at least quarterly, and your advisor should explain what they are doing.”
Once a year make sure to do each of the following:
–Shred outdated files.
–Meet with your accountant to ensure your tax payments are up to date before Apr. 15. And use the meeting to discuss tax-savings strategies.
–Increase your 401(k) contribution to coincide with your merit raise at work. “That way you increase your retirement savings and lessen your tax burden without an impact on your current cash flow,” says Carlos Guevara, a senior vice president at Firstrust Financial Resources in Philadelphia, Pa.
–Most credit card companies generate a breakdown of customer expenses by category over the year. Review this report and see if there are areas for improvement or savings. “Credit cards can be weapons of personal destruction, but if used properly they are great tools for cash management in a modern society,” says Davide Accomazzo, managing director of Cervino Capital Management in Los Angeles and a Pepperdine University finance professor.
–Ask your auto, home and life insurance agents to make sure your coverage makes sense, and then ask your independent agent to shop your policy for the best price, says John Olson, author of Square One: Financial Planning a Few Minutes at a Time (2010).
–Check your debt load. Experts recommend that your housing debt should never exceed 28% of your pretax income, and all of your debt combined should be less than 36% of your income.
–Check interest rates on savings, money market and credit card accounts, and do a little research to find out if better rates are available, says Kevin Gallegos, vice president of Freedom Debt Relief, a credit counseling company.
–Meet with your financial advisor and/or review your retirement portfolio to make sure you’re on track with your goals.