While you are sheltering at home to avoid the coronavirus pandemic, now is a good time to clean up your finances. You might also need to clean up after coronavirus, even if you’ve turned into a hermit, because a family member may be sick and not yet showing symptoms. Here are a few spring cleaning tips for your money and your health.
How to Clean Up Your Finances
Spring is a good time to clean up your finances, not just dust bunnies.
When to Review Your Finances
- You should review your finances at least once a year. Spring is as good a time as any.
- There are several signs that you are overdue for a financial review:
- You carry a balance on your credit cards from month to month.
- You are living paycheck to paycheck.
- You haven’t looked at your credit reports in years, or ever.
- You are so disorganized that you have trouble finding financial documents.
- You aren’t saving for your children’s college educations and for your retirement.
- You aren’t properly managing your student loan debt.
Create an Emergency Fund
First things first. Set up or replenish your emergency fund. It is especially important to maintain an emergency fund during a national emergency, when unemployment rises. Keep at least half a year’s salary in your emergency fund. The emergency fund should be easy to access quickly, such as money in a bank savings account or a money market account.
Use a spreadsheet, Quicken or Mint.com to track your finances.
Create a financial inventory in which you list all of your financial accounts:
- Bank and brokerage accounts
- Credit cards, auto loans, mortgages and student loans
- Retirement and college savings accounts
Build a budget. Start by creating a descriptive budget, where you track all of your spending for a month. Assign each expense to a broad category, like food, housing, clothing, medical care, transportation, debt, taxes and insurance. Be sure to distinguish between wants and needs. Needs are mandatory expenses where you will die or go to jail if you don’t spend the money. Just being aware of your spending will help you exercise restraint.
Prune Your Pile of Paperwork
Conquering paperwork does not mean folding it into a crane or other origami. Even if you have a passion for paperwork, you should organize it and toss anything you don’t really need.
Set up a system for organizing your receipts and other paperwork. This will make it easier to manage your finances at tax time. For example, have an envelope for each type of receipt instead of throwing them all into a shoebox. One envelope might be reserved for work-related expenses and another for healthcare expenses. A little time getting organized now will save you a lot of time later.
You need to retain paperwork for 3-7 years, depending on the type of paperwork. For example, you should keep W-2s, 1099s, tax returns and other supporting documents for 7 years, longer if they are complicated. You can get rid of ATM receipts and bank deposit slips after they appear on your bank statements. Likewise, toss old credit card receipts after you’ve paid the credit card bill, except for receipts for big-ticket items and expenses that are covered by a warranty.
It’s a good idea to keep a few utility bills from each place you’ve lived, in case you need to prove that you lived there. Perhaps keep the first and last utility bills at each location.
You should keep your student loan promissory notes, statements and paid-in-full letters forever. Dead loans sometimes resurface and it can be hard to prove that a zombie loan was paid off without this paperwork.
Never throw out retirement-related records, estate-planning documents, wills and insurance policies.
Sometimes, you can scan and store financial paperwork on your computer. Consider going paperless with some bills, saving the electronic versions of the bills. But, be sure to have redundant backups of your computer files and test the backups periodically.
Shred financial documents before discarding them. This will protect you from identity theft.
Simplify Your Financial Life
Financial accounts have a tendency to multiply. It is easier to open a new account than to close an old one. Sometimes you need to keep an old account alive, but it doesn’t need to clutter up your finances.
Reduce the number of credit cards you carry in your wallet. Don’t cancel the unused cards, unless they charge an annual fee, since this can affect your credit scores. Instead, cut them up and stop using them.
Reduce the number of investment accounts. In particular, move 401(k) retirement accounts from past employers into a Rollover IRA.
Dealing with old college savings accounts is trickier. Some 529 plans treat an out-of-state rollover as a non-qualified expense. So, check the rules for a 529 plan account before rolling it over into your current 529 plan. Depending on your state, an inbound 529 plan rollover may qualify for a state income tax deduction or tax credit.
Eliminate unnecessary redundancy in your investments. You need only one S&P 500, Russell 2000 or total stock market mutual fund or ETF. These portfolios all serve the same function. Their performance is similar, driven by the same 75 or so stocks. The main difference between these investment options is cost and tax efficiency, so pick the one that works best. Since selling a position in one investment can lead to capital gains, unwind the investment over time, offsetting the capital gains with losses. In a retirement plan account, you can move the money more quickly.
This may also be a good time to have a money talk with your spouse. Make sure they understand where everything is. Discuss income and expenses, savings and debt. Set short-term and long-term financial goals.
Review Insurance Policies
Start with a health insurance checkup, to make sure your coverage is adequate.
Update the beneficiaries on your life insurance policies and retirement plan accounts. Update your will as well.
Consider increasing the deductibles on your auto insurance. After all, you aren’t driving your car during the pandemic, so why pay as much in insurance premiums? Part of the purpose of your emergency fund is to cover the cost of insurance deductibles in the event of unanticipated expenses.
Consider term life insurance, if you don’t already have a policy. The Fabric App can help you apply for life insurance and get set up right from your couch.
Curb Your Spending
Cut your spending now, so you don’t have to cut it more drastically if you lose your job. Start with a spending freeze, then cut expenses that you don’t really need.
Cut out unused and unnecessary subscriptions and other periodic payments that you no longer need or use. For example, cancel your gym membership. You can’t use it and still comply with social distancing requirements.
Use income, not credit, to pay for living expenses. Do not carry a balance on your credit cards. Credit cards are useful for streamlining your finances, so you have to pay only one bill instead of several. But, it is easy to get overextended with credit cards, since paying with plastic feels the same whether you are spending $5 or $500. If you carry a balance on your credit cards, not only are you paying interest on your debt, but you are also literally living beyond your means. Live below your means, so you have the means to live.
Die Debt, Die!
Dealing with debt is simple. Accelerate progress toward paying off the debt by making extra payments on the loans with the highest interest rates. Also, consider refinancing high interest debt into a lower interest loan. Both moves will reduce the interest you pay, saving you money.
Refinancing high interest private student loan debt could lower your interest rate and save you money. Keep in mind refinancing federal student loans means a loss in benefits, including the temporary payment pause due to coronavirus and Joe Biden’s proposal to forgive some federal student loans. You’ll also lose the option for payments based on your income, potential for loan forgiveness, and the ability to postpone payments during unemployment and economic hardship. Credible is a tool for comparing multiple lenders at once.
Review your credit reports for free at annualcreditreport.com. As the web site name suggests, you can and should review your credit history every year. Correct any errors on your credit report.
Boost Your Savings
Check whether your college savings is on track. To benchmark progress on reaching your college savings goal, multiply your child’s age by $3,000 for an in-state public 4-year college, $5,000 for an out-of-state public 4-year college and $7,000 for a private 4-year college. If your college savings equals or exceeds this figure, you’re doing fine. Otherwise, you’ll need to make a catch-up contribution or increase the amount you save each month to eliminate the shortfall.
To check whether your retirement savings is on track, do the math. Project your retirement income and retirement expenses. Add a cushion, just in case you lose your job or your health prevents you from working until retirement age. If there’s a shortfall, you’ll need to increase contributions, reduce expenses or delay retirement.
You should save a fifth of your income for the last fifth of your life. This is consistent with a rule of thumb based on your savings-to-income ratio. Your retirement savings should equal your annual income multiplied by an age factor, which is your age divided by 5.
Automate your savings. Set up an automatic transfer from your bank account to your college savings plan accounts. Contribute as much as possible to your retirement plan, at least enough to maximize the employer match. Set up an automatic transfer to a savings account for your emergency fund. Automating your savings ensures that you save consistently.
Fine-tune your investments by rebalancing your asset allocation. Market volatility may have caused your investment mix to no longer match your target asset allocation.
If a stock is falling much faster than the overall market, it may be time to let it go.
Although it may be frightening to invest when the stock market is sliding, think of it as an opportunity to get the stocks at a steep discount.
When interest rates are at or near record lows, it is time to sell investments in bonds, as there is no upside to bond pricing. Keep your low-risk money in cash, a money market account or FDIC-insured investments such as CDs.
Continue to make saving for college a priority. You can open separate accounts for multiple children, receive gifts from family and friends and automate your savings.
How to Disinfect a Solid Surface Using Household Cleaners
The new coronavirus, more formally known as SARS-CoV-2, is an RNA virus that is enveloped with lipid membranes. Lipid membranes are fragile, making it easy to kill the virus while it is still outside the body.
Focus first on cleaning and disinfecting solid surfaces that people touch, such as refrigerator handles, door knobs, handrails, drawer pulls and knobs, desktops, tables, counters and computer keyboards and mice. Also, don’t forget to thoroughly clean and disinfect your bathrooms.
In general, a disinfectant should remain on a surface for at least 10 minutes. Wait after you spray before wiping the surface with a paper towel. If you immediately wipe up the spray, it will not be effective in killing the coronavirus.
There are several common household cleaners that can be used to disinfect solid surfaces. Be sure to read and follow the directions on the product label.
- Soap and detergents. Although not normally considered a disinfectant, detergent at a 2% dilution will kill coronavirus. Washing your hands doesn’t just remove coronavirus from your hands, it also kills it. Wash your hands for at least 20 seconds and be sure to clean both bottom and top, as well as between the fingers and under your fingernails.
- Household bleach. Sodium hypochlorite, the active ingredient in household bleach, will kill coronavirus. Mix full-strength bleach with water at a concentration of 1/3 cup of bleach per gallon of water. Tilex, Clorox Clean-Up, and toilet bowl cleaners with bleach all have the right concentration, but always check the label to make sure it has at least 2% sodium hypochlorite. If the concentration is much lower, you’ll need to leave it on the surface longer.
- Hydrogen peroxide. Hydrogen peroxide at a 3% or greater concentration and accelerated hydrogen peroxide at a 1.5% or greater concentration will kill coronavirus.
- Ethanol. Ethanol at 60% or greater concentration will kill coronavirus. Do not use ethanol at a lower concentration, as it has not been shown to be effective at killing coronavirus. A 70% or greater concentration is preferred.
- Isopropyl alcohol. Isopropyl alcohol at a 70% or greater concentration will kill coronavirus.
A list of other disinfectants can be found on the Environmental Protection Agency (EPA) web site.
Ethanol and isopropyl alcohol can be used to clean touch screens and other electronics. But, check the manufacturer’s instructions, because some touch screens have a special coating that can be harmed by household cleaners.
Never mix two cleaners, as the result can be harmful and it does not make the cleaners stronger. Mixing cleaners can also neutralize the disinfectant properties. Mixing certain cleaners can create chlorine gas, which is toxic. It may even cause an explosion.
Textiles, such as fabric, bedding and carpets, cannot be cleaned with bleach without damaging them. Test one of the alternatives in a hidden area to see if it affects the color. Launder clothing at a high temperature or sanitize setting. Don’t forget to disinfect the laundry hamper while the clothes are in the wash.
Before using a strong cleaner, like bleach or hydrogen peroxide, put on gloves to protect your hands. If you only have thin disposable latex or nitrile gloves, put on two pairs. Double-gloving will protect your hands against leaks and tears.
Ultraviolet light may not be effective at inactivating coronavirus, depending on the type of light. Although UVC (200-280 nm) has been shown to be effective at a distance of 3 cm after 15 minutes of continuous exposure, UVA (320-400 nm) was ineffective even after 15 minutes of exposure.
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