This Week in Your Wallet: June 12, 2012

Posted by Jean

I don’t know about you, but I don’t always do my “spring cleaning” right on time.  Many of my friends scour their houses at the first sign of warm weather, but not me. I find I don’t have the time to go through everything that has piled up until school is out and the kids are ready for camp — in other words, right about now.

Perhaps this is why a New York Times article about giving yourself a financial tuneup caught my eye this weekend. In it, Ron Lieber talks about all the things in your financial life that may have gotten out of control or become out of date over the past year: your budget, retirement accounts, auto-payments and more.

You see, it’s easy to think that once you have a budget or set up automatic 401(k) contributions, yourwork is done. However, that’s not the case. Life changes, situations change; as a result, your financial life needs to change, too. Here are some of the things  Lieber says you should check in on:

• Your investments. If you haven’t rebalanced them within the last six months, I’d rebalance now. Some 401(k) accounts give you an “automatic rebalancing” option, which is a terrific way to take the emotion out of investing. If your account rebalances automatically, you won’t be tempted to hold onto any one stock for too long.
• Rewards. Lieber writes about calling Capital One and asking them for a check for $145.19, the result of a couple years’ worth of cash back rewards that he had yet to recoup. If you’ve forgotten to redeem rewards — or if you’ve even forgotten which rewards programs you’ve signed up for — take an afternoon to do inventory. You might emerge a couple hundred dollars richer!
• Savings. If you’ve been saving successfully and think you could be contributing a little bit more to your nest-egg, push yourself to save 1% more off the top of your paycheck. The increase might not seem like much now, but could add up to thousands if you make this a yearly habit.
• Discounts.  As for me, I got a letter from my cable company that my prices were going up.  You can guess how much I liked that (hint: not one bit).  So I picked up the phone and reminded Verizon just how valuable I was to them and how much Cablevision seemed to want my business.  Less than 5 minutes later, I had saved $240 for the year.

For an incredibly helpful checklist of other things to do in your financial checkup, click through here. There are 31 items, each of which comes with an explanation for why the item matters and an estimate of how long it will take to complete. (Example: “make an extra mortgage payment — 5 minutes. You can pay off the loan sooner and save thousands in interest.”) I challenge you to take a day to go through all 31 items. It may seem time consuming now, but I think you’ll feel a LOT better about your finances when you’ve completed the checklist.

And now, here are the other headlines for the week…

Overdraft fees rising

Even though financial regulators are investigating overdraft fees, banks have decided to raise the rates even more. SmartMoney magazine says Fifth Third Bank is raising its fees for overdraft transactions to $37, up from $33, and U.S. Bank is raising fees to $15 and $35 depending on the size of the transaction, up from $10 and $33, respectively. The moral of the story here? Don’t overdraw youraccount. But if you think you’ll have trouble doing that, the next best thing is to not opt in to overdraft protection. A denied card might be embarrassing, but it won’t hurt as much as paying $30 or more for a cup of coffee.

Financial fragility continues to be an issue

To be “financially fragile,” as you may have heard me explain before, is to be unable to come up with $2,000 in 30 days, in the case of an emergency. And, according to a new study by the National Bureau of Economic Research, nearly half of Americans fall into that category. One-quarter of the NBER respondents said they absolutely could not come up with that amount of cash in 30 days; another 19% said they’d be able to scrape it together but only by selling/pawning possessions or relying on a payday loan.

AOL’s Daily Finance came up with three scenarios in which you would need to come up with $2,000 – would you be prepared if they happened to you? If not, they (rightly) tell you to think of it this way: if you start setting aside $170 each month, you’ll have a $2,000 emergency fund in just one year. So start saving!

Speaking of having a spare $2k….

Apple unveiled its latest round of updates on Monday, including the brand new MacBook Pro. But if you like to be an early adopter for all things Apple, be prepared to pay up. The new MacBook Pro starts at $2199. Yikes! You better start saving now. In the meantime, you can catch news on Apple’s other updates through this link here. (Not all of the updates are quite as pricey as the MacBook Pro. Whew.)

Have a great week!

Jean