Published by Taylor Maks | Client Relationship Manager | Stonebridge Financial Partners
As we heed the recommendations of the folks in the highest seats of our government and healthcare systems, many of us are finding ourselves with a bit more free time than normal. Hopefully much of this time is being spent relaxing, spending time with immediate family members, catching up with friends (remotely of course), and most importantly staying healthy.
Physical health has been everyone’s focus over the last month or so, as it should be, but we also believe that spending a bit of time focusing on financial health can be beneficial while social distancing. Here are a couple of things you can do to better organize and protect your financial life and maybe even save a couple bucks here and there.
Run a Credit Check and Secure your Credit
Your credit report contains a list of information highlighting how you often you access credit and how reliability you repay your debt. Along with this, the report includes a lot of personal information including job history, whether you have filed bankruptcy, addresses, history of foreclosure, and more.
Given that credit reports are used in a variety of ways (qualifying for loan, job applications, renting an apartment, etc.), it is vital that they stay up to date and accurate. According to the Federal Trade Commission, people are entitled to one free copy of your credit report every 12 months.1 You can order this online here.
If you find that your credit report is inaccurate, you can dispute it. You can contact one of the three credit bureaus, Experian, TransUnion and Equifax and explain in writing what the error is and why it is incorrect. Running a credit report now can save you a lot of time in the future if there is any inaccurate information. This will also help you stay protected from identify theft and fraud which are becoming increasingly more common in today’s digital world.
Reimburse Yourself for Medical Expenses
Health Savings Accounts (HSAs) are some of our favorite tools as financial advisors because they offer the highly attractive “triple tax advantage.2” The first tax advantage of an HSA is that they allow you to contribute, pre-tax, up to $3,550 if you are single and $7,100 for a family per year. They also allow a $1,000 catch up for those over the age of 55. Because these contributions are tax deductible, they reduce your federal income tax owed. The second tax advantage is that HSAs allow your assets to grow tax free at the federal level. These assets can be invested just like a traditional investment account. Lastly, if you use the funds for qualified medical expenses, they can be withdrawn tax free. When used in this manner, this is the most tax efficient investment vehicle out there.
One of the best features of an HSA is that there is no time limit to reimburse yourself for qualified medical expenses that you paid out of pocket. Whether you didn’t have your HSA card at the time, never submitted for reimbursement, or just forgot entirely about the benefit, as long as you still have your receipts, you can reimburse for any qualified medical expense for as long as you had the HSA. One trap to look out for: if you deducted any medical expenses on your tax returns in previous years, do not submit for reimbursement as that would be considered “double dipping.” Submitting for reimbursement is a great way to put a bit more cash in your pocket during these uncertain times and allows you to take advantage of the benefits your HSA offers.
Review your Subscriptions!
Many of us have become very skilled at a different kind of distancing. Distancing ourselves from our monthly credit card and bank statements. I know I have. Unfortunately, it probably means we are missing out on finding ways to save money on some of the services and products that we no longer use, let alone know we are still paying for to begin with! Subscription-based services and products have become increasingly popular and an integral part of our daily lives. The average American spends $237/month on subscriptions3 whether it’s a food service, streaming service, gym membership, magazine subscription, cable channel, the list goes on and on.
Now, we are not recommending that people stop paying for subscriptions they use, rather take the time to look through your monthly or annual credit card and bank statements and try to identify if there are any services that you no are still signed up for and no longer use. This is a good exercise to get back in tune with where your money is going and to potentially save a bit more if you find opportunities to do so.
Finish your Taxes
Normally, at this time of year, people are scrambling to either finish their taxes or request an extension to the traditional April 15th deadline. With the passing of The CARES Act, legislation aimed at providing relief to families and businesses in the wake of COVID-19, the 2020 filing deadline was pushed back until July 15th for federal taxes. States are evaluating this on a state by state basis, and a list of states doing something similar can be found here.
Just because the tax deadline was pushed back does not mean you need to wait until July to finish filing though. It may make sense to knock this out while you are spending more time at home, especially if you anticipate receiving a refund. The CARES Act provides another reason to finish filing your taxes sooner rather. For those that qualify for stimulus checks (see below), the federal government will start by looking at your 2019 taxes (if you have filed) to find banking information to direct deposit the amount into your bank account. This would be the quickest way to receive the stimulus check if you are anticipating one.
Stimulus Check Qualifications:
|Tax Filing Status
|Up to $75,000
|Head of Household
|Up to $112,500
|Married Filing Jointly
|Up to $150,000
|Dependents (under 17)
*Please note that there is a phased-out amount that individuals who earn up to $99,000/year, heads of household earning up to $136,500, and joint filers who earn up to $198,000 will receive.
Organize your Financial Documents
Whether they come in paper form via the mail or emailed to you on a monthly basis, statements come from everywhere. Bank statements, mortgage statements, investment account statements, you name it. Some people are diligent about looking at each one, while I imagine others toss them in a drawer or the paper shredder as if they didn’t exist. The reality is with these documents, you don’t need them until you do. For instance, if you are applying for a mortgage, applying for loans, or doing your taxes, you may need to access these relatively quickly. While you can always collect them as needed, having them ready to go at the click of a button, so to speak, would be nice.
For this reason, as well as having a more organized financial life, it may be worthwhile to spend a few hours creating a filing system for these documents. This can be done either using a physical filing system (like a file cabinet) or can be an electronic file on your computer. Either way, we suggest locking the filing cabinet or placing a password on the electronic file, to try to secure your personal information. Some suggested folder names could be Mortgage Statements, Property Taxes, Insurance, Investment Accounts, Taxes, Bank Accounts, and more.
Read a Book or Two
Social Distancing has provided us a lot of time to find activities within the confines of our own homes. A great activity to do while relaxing at home in your sweatpants or pajamas is reading! Personal finance does not sound like the most exiting book topic, but I assure you reading a book or two on the topic will be educational and time well spent. The personal finance books that are worth reading are not your “get rich quick” type of books, rather they are focused on developing good financial habits and a greater understanding of how to utilize, spend, build and protect your money and wealth.
A few of our favorites here at Stonebridge are “Why Didn’t They Teach me this in School?” by Cary Siegel, “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” by Thomas Stanley, and “The Little Book of Common Sense Investing” by John Bogle.
We hope everyone is staying safe and staying healthy and do not hesitate to reach out if you have any questions!
The opinions are those of the writer, and not the recommendation or responsibility of CWM, LLC, or Cetera Advisor Networks, LLC. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.