Spring Cleaning My Finances and Looking Ahead.
Posted: May 11th, 2011 | Author: Joe | Filed under: Banking, Investing, Tips | Tags: 401(k), Banking, IRA, Refinancing | 2 Comments »“The open palm of desire
Wants everything
It wants everything
It wants soil as soft as summer
And the strength to push like spring”-P. Simon, Further to Fly
Spring is here (FINALLY)!
It’s been a long, cold, lonely winter here in the northeast, but the buds are present and the tulips are pushing through. That means it’s spring cleaning time – time to get our (financial) houses in order!
Here’s how I’m cleaning out the financial cobwebs in my life this spring, and using that desire to push like spring into a summer realignment of my retirement planning.
Consolidating bank accounts
Life’s been a bit crazy for me these past 7 years. Here’s what happened to me that had an effect on my finances:
- I moved to a town 2 hours away and changed jobs
- I became a homeowner for the first time
- I had a child
- I had another child
- I moved to another new town (20 minutes away) and bought a new house, to make room for an expanding family
- I had another child (that makes 3!)
- I changed jobs again
That’s pretty much it, but I think that’s enough.
All of the above changes have left me in a situation of having abandoned bank accounts strewn to the four winds. As of just last week, I had 5 bank accounts at four different banks! That’s not counting any high yield, online savings accounts at ING and HSBC either. That’s just local banks and credit unions.
Remarkably, most had little money in them and no fees associated with keeping them open, even though they were dormant. When I cleaned out the two accounts at one bank that had been dormant for more than 2 years, I had just under $50 between the two of them. I probably did them a favor by saving them the money to mail me bank statements every month stating that nothing had changed from the previous month!
Of course, all of these accounts make my book keeping a hassle too. I had piles of useless papers to be keep, or discarded securely and so many accounts in Quicken that my eyes glazed over every time I started to reconcile my banking activity. Not the thing you want to happen when maintaining your finances.
In fact, I made a sort of informal pledge to myself at the beginning of the year to simplify and streamline my financial life as much as possible. It’s already paying off. I no longer feel overwhelmed by the number of accounts and financial detritus cluttering my Quicken records. As a result, I am up to date on my banking for the first time in over a year! Go, Me!
Refinancing
Another effect of all this moving around over the past 7 years is that while I got a decent interest rate on my mortgage in 2008, rates had gone even lower since then.
Rates got so low that I initiated a refinance back in January with a local credit union, which meant yet another bank account (see above), but it was worth it.
It took about two months of processing, but I went from 6% to 4.5% – saving over $200 a month!
I was initially reluctant to refinance, but the rates just became stupid low, and it’s a bi-weekly payment schedule with no pre-payment penalties so it just made sense. Besides, it wasn’t a cash-out refinance, so I wasn’t setting the clock back on owning the home free-and-clear.
Looking ahead
“…And the strength to push like spring”
Rollover to an IRA
That covers what I’ve done so far this year, but the final result of that list of financial changes is due to the job changing: I have a dormant 401(k) plan.
I’ve written about this before. The simple problem is that for the first time in my professional life, I work at a company that offers a terrible 401(k) plan and no company match. I love the job, and it’s in a very secure sector, so it was still the right move to make. But while all this dust was settling on the new job and baby activity, I had put my retirement contributions on hold until I figured out what I wanted to do with it all.
Well, I finally figured it out, and now I need to implement it. No more dawdling, dammit!
In the next few weeks, I will be rolling over my 401(k) to a simple IRA and start implementing my rollover plan detailed here.
Next steps.
After that, I figure it’s a good time to create a new budget to account for the savings from the refinance and the new contributions to my IRA as well as the hidden costs of living in this new house with another child. But more on that another day.
[...] to warrant chasing the interest rate from institution to intuition, and that it’s better to keep the number of bank accounts limited, so I kept my ING and HSBC accounts. HSBC had been offering a higher rate than ING until recently [...]
[...] Fewer savings and checking accounts means less overhead and time in managing them and keeping track of your money. It also means your money is more focused and earning even more compound interest. [...]