“The time to repair the roof is when the sun is shining.” — John F. Kennedy
The stock market is up, the jobs report is positive and unemployment is down. Real estate prices are rising almost everywhere. Have you thought about finances lately? Here are 7 things to do right now to make sure that the roof on your financial house is in great shape.
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7 Things to Do NOW to Get Your Financial House in Order
1. Get a copy of your credit report.
You are entitled to a free copy of your credit report once every 12 months. Make sure you are taking advantage of this, and get a copy of your credit report. There can be incorrect or outdated information that is affecting your score. Make sure the credit reporting agencies have the most up to date information so your score is as high as possible.
There are many sites that can give you a free credit report, but Equifax, Experian and TransUnion — the three credit reporting agencies — created a site explicitly to comply with the law. AnnualCreditReport.com doesn’t ask for your credit card number and then automatically sign you up for some credit monitoring service you didn’t want… unlike some other sites.
Related: How to Improve Your Credit Score
2. Evaluate your insurance policies.
Insurance companies typically offer teaser rates to get you to sign up with them, but after the first year or two, they go up. I recently heard an interview on the radio with a man, who after being a loyal customer for 20 years, wanted to add his 16-year-old son. The price he was quoted was ridiculous. He called them up and asked for a policy review. He said he was thinking about moving his policy somewhere else. They “reviewed” his policy and gave him a 40% rate drop — just for asking!
When my sister was much younger, her driving skills were subpar. After an accident in which she was clearly at fault, we received a notice from the insurance company that our rates were going up and that my sister was being labeled a “High Risk Driver.” My mother called the company and reminded them that she and my father had been customers for more than 30 years, and whenever another insurance company called up to see if they could give a quote, she politely declined. But if our insurance company didn’t remove the high risk driver label from my sister’s record, she would call up every other insurance company and go with whoever had the best quote. Guess who isn’t a high risk driver?
Did you know that most insurance companies give multi-line discounts for having more than one policy with them? Make sure your home(s) and vehicle(s) are all insured with the same company. Do you drive less than 7,500 miles per year? Many insurers offer low-mileage policies. Can you afford to raise your deductible? A higher deductible offers a lower premium.
3. Review/refinance your mortgage.
Mortgage rates are low right now, but the Fed is getting ready to raise interest rates for the first time since 2006. They dropped to almost zero in 2008 in an effort to stimulate the economy. If you haven’t refinanced for a while, you could be paying much more than you need to. And if you have an ARM (Adjustable Rate Mortgage), you could be in for quite the rate increase if you don’t refinance into a fixed rate mortgage before rates go up.
4. Consolidate your retirement accounts.
I have had different jobs that offered 401(k) plans. One was really great, but the others were not. I didn’t know exactly how bad the other plans were until I used the Personal Capital Fee Analyzer and discovered that I was paying ridiculous amounts in fees. What had started out as $1,500 had been chewed up by fees, and I was left with $800.
It took an obscene amount of time to get that money transferred from the original place to Vanguard (they sent the wrong forms to fill out, the forms weren’t notarized correctly, etc.), but I am now in a low-fee Index Fund, and I watch that money grow rather than be consumed by fees.
5. Max out your 401(k).
Does your company offer a 401(k) as part of its incentive package? Do they offer a 401(k) match? If so, you should be taking advantage of this by participating. Do a little research into the offerings, and find the one that is most consistent with your goals. It is best to max out your 401(k), but at the very least, you should be contributing as much as will get your entire company match — that’s free money you are just throwing away.
A company-sponsored 401(k) allows you to reduce your tax burden in two ways. First, you lower your current tax obligation by putting money into the program before taxes are assessed. You do pay taxes on the money when you take it out after retirement, but you will most likely be in a considerably lower tax bracket.
6. Rebalance your investments.
We are in the sixth year of a bull market, when they usually last about four years. A couple of my stocks have been on an absolute tear, and I have two in particular that make up about one third of my entire portfolio. While I am thankful they have done so well, I am leery of what could happen to my balance if they suddenly fall out of favor. Remember Blackberry and Nokia?
Now is the time to look at your entire portfolio and make changes where necessary.
Related: How Much Do I Need to Retire?
7. Cancel your expensive phone service.
Gone are the days where your only option for a cell phone came with a hefty monthly charge. If you are an iPhone user, Ting is the way to go. They have agreements with Verizon and Sprint, with call/text on either network and data through the Sprint network. Plans start at $25 a month.
Android users can sign up with Republic Wireless. They offer service over wifi when available, and over the Sprint network using 3G and 4G when Wifi is not available.
With both services, you pay for the phones up front, then pay the low monthly fee for the service you use. Traditional cell providers subsidize the phones by charging larger monthly fees. To further cut costs, you can purchase a used phone on the secondary market or use your existing phone. Just make sure your phone is compatible with the network and that any phone you purchase has clean record by cross checking with an online database like Swappa.
The best time to deal with a problem is before it becomes a problem. These seven things can help put more money into your pocket — or save the money you already have.
What are some steps you have taken to ensure the roof on your financial house is secure?
Let me know your suggestions below, and let’s help each other out!