When Is It Time To Get Rid Of Your Financial Records?

Now that we’re in the second half of the year, it’s time to think about how long you have to – or want to – keep all of the financial documents and bills and tax returns and other information you have. And – while you’re at it – setting up a better filing system for your retained financial info (other than a shoe box or throwing it into a drawer) is a good idea as well.

Let’s start with the simplest things to dispose of. Any type of ATM receipt or deposit slip or cancelled check can be shredded once you reconcile the withdrawal or deposit with your account either online or via your monthly statement. (And if you don’t have a shredder, get yourself to a Staples or Target today and buy one, please). More often than not these days, a bank will not return a physical copy of your cancelled check to you but you should always be able to get a copy of it from them if you need it. If you get a bank statement via paper, keep each month’s statement until you get or can print out an end-of-the-year summary.

If you still get a paper paycheck stub from your employer, keep them until you get your W-2 in the beginning of the following calendar year and can make sure all of your weekly pay has been properly accounted for in the W-2. And it’s always a good idea to keep your W-2 until you get your annual Social Security statement to make sure that what you were paid in a given year was reported to and recorded properly by the Social Security Administration.

For anything you charge or use your debit card to buy, you can usually get rid of the receipt as soon as you match it up with your monthly credit card bill or bank statement. The exception is that you might want to think about keeping receipts for big-ticket items like appliances and furniture and the like because sometimes you need to provide proof of purchase for warranties and extended insurance plans. If you own a small business, you should hang on to these types of receipts for 3 years to support any type of deductions you may have claimed or expenses you’ve shown on your federal and state income tax returns.

Any of your monthly or quarterly bills – think your electric or gas bill, cable, telephone, car insurance or trash removal – can be shredded after a year (unless the bill relates to your home business and you’ll need them for your tax returns).

And now that we’re talking about bills and bank statements, if you’re still getting paper copies, think about switching to online bank statements or monthly bills that are e-mailed to you instead of physically mailed to you. (If you work for the United States Post Office, I know you won’t appreciate me recommending this so I apologize in advance.)

If you sign-up for online bank statements, for example, you can avoid what is becoming a more popular trend by banks, which is to charge you a monthly fee for mailing you a paper copy of your bill. If you get your monthly bills e-mailed to you, you’ll always be able to access them (and save filing space) by keeping them digitally through saving them as a PDF file on your computer (which you can always print if you need to for some reason).

Let’s work backwards in terms of what you need to keep forever. Some of these are financial records, some are just personal records but – either way – they’re important to always have. First are the birth certificates for you and your family. As your children grow up, they’ll need their birth certificate to get a driver’s license or to submit a college application. All of you will need a birth certificate to get a passport. If you’ve misplaced it, you can order another copy either directly from the municipality in which you were born or through a company known as VitalChek.

If you’ve adopted children, keep the adoption papers forever. Once you’re married, your civil marriage license is important to keep always as it may be needed for insurance purposes. If you divorce one day, your divorce decree and support/custody agreements are important documents to always keep as they’ll be needed for selling a home, or taking your former spouse off your health insurance or removing your former spouse from your life insurance policy or bank account.

Anything relating to someone’s estate – a will, a power of attorney, a living will, a guardianship – should be kept forever.

The deed to your home and your mortgage note, as well as the mortgage satisfaction (once your mortgage is paid off) should also be kept with all of your other financial records forever.

Here’s what you need to keep for at least 3 years. Since your income tax returns can be audited for any reason up to 3 years after you file, that’s the minimum amount of time you should keep them.

Personally, I’ve kept my income tax returns since I divorced many years ago, scanned and saved digitally on my computer. Some people feel more comfortable holding on to income tax returns indefinitely. Whatever your comfort level is – as long as it’s at least 3 years – is what you should do.

Keeping a copy of your medical records, tests and insurance Explanations of Benefits for at least 3 years is also important. It lets you keep information readily available that you might need to share with new physicians or facilities which might not have easy access to your prior medical history.

It’s also a good idea to keep your insurance policies – auto, homeowners, umbrella and life – for at least 3 years. If you’ve made a claim or need to check what type of coverage was in effect at a certain point – or just want to keep track of your history of payments for a specific type of insurance – having these documents on hand is invaluable.

And – last but not least – spend a few hours and set up a filing system that works for your life and your habits. If you’re not a super-organized person, then don’t set up something you’ll only abandon because it’s too difficult and time-consuming. There are all kinds of organization systems that you can find at all sorts of stores like The Container Store or Staples. Here’s what I do (for what it’s worth).

I have an accordion file divided by month where I keep a copy of each month’s bills. I have another file by year where I keep a copy of each year’s tax returns and supporting documentation. And I have a third file that is set up alphabetically to file insurance policies, appliance warranties, medical records – you get the idea. I also try to scan everything on to my computer so – just in case something ever happened to my paper copies of documents – I’d still have a way to access my records.

Some people store important papers in their safe deposit boxes. Others use a version of what I do. What ultimately matters is that you keep your things organized in a way that works for you and that will enable you to find what you need when you need it without rifling through boxes of receipts, or pulling papers out of a file cabinet stuffed with them. A little bit of time spent now to organize will pay off when you need to look at your paperwork again. Trust me on this.

Start Your Engines. Now Is the Time To Buy a New Car.

Now that summer is officially here, it’s an excellent time to visit your local car dealer or look online if you’re in the market for a new car.

Typically,most new model year cars get released during the summer. Since car dealers have only so much space on their lots for inventory, that means that – as new models come in – they need to clear out current year models to make room for 2016 cars. Which means that now is a very good time to buy a 2015 model year car.

And so that you don’t think that you’ll be missing something by buying a 2015 model instead of a 2016 model, more often than not, car manufacturers only make minor design changes to cars from one year to the next. Sometimes it’s as simple as a new trim style that’s being offered. If a car manufacturer is making a major change, you can be sure they’ll be advertising it but it tends to be a few years between big changes in car models.

There are also some basic tips that can help you get a good price on a new car. Besides picking the optimum time of year to buy, there are better days or better weeks to buy cars. For example, since car dealers typically aren’t open on Sunday, they close out their sales week on Saturday evening. If you head to a dealer (armed with research, information, patience and a healthy dose of skepticism) late on a Saturday afternoon, you have a good chance of getting an even better deal as they need to up their sales figures for the week and getting you to sign on the dotted line before 9:00 on a Saturday night will help them achieve that.

Anyone who works on commission also has a monthly quota so the later in the month you head in, the better chance you have of getting a better deal on a new car. A motivated car sales person will likely be willing to cut their commission if it means the difference between making a sale or watching you walk out the door. And don’t let rain or snow prevent you from going to a dealer and looking at cars on the lot. Most people won’t want to go out in bad weather to shop for cars. You can leverage that to your advantage as that will make you an interested buyer to a motivated car sales person. A slow day at a dealership is always good for the consumer.

One of the things you do need to keep in mind, though, is that even if you follow all of these suggestions, sometimes you won’t be able to do much better on a prior year model particularly if it’s a high-demand car (think Prius) or relatively new styles (like small crossover SUVs). Do your research, pack your patience, don’t be talked into bells and whistles on cars you don’t need and be prepared to walk out the door if you can’t negotiate a deal that works for you.

If you do all of this, you just might be able to celebrate the long days of summer by driving off the lot in your new 2015 car, having saved yourself a considerable amount of money.

Women and Divorce – What You Need To Know – Part 3

A very complicated piece – and possibly a very contentious one as well – of a divorce is your and your spouse’s pensions and retirement benefits.

A pension and a 401k earned during your marriage are generally considered the same as any other type of marital property – that is, they’re treated the same way as your house or your bank accounts. According to very good information at the Pension Rights Center, typically a divorce court will decide how the pension assets are divided and whether a former spouse is permitted to receive your pension benefits (or for you to receive benefits under his or her pension).

Because this is an area where laws differ on a state-by-state basis, it is very important for your legal representation to research this so that your pension is handled properly. You will likely have to get your spouse to agree in writing that they are waiving their rights to your pension so please don’t ignore this important piece of financial housekeeping when you are divorcing. It’s not something you’d want to be facing years later when you are ready to collect your pension.

And since people can and do take withdrawals from 401k plans, you and your lawyer should make sure that what can be a sizeable asset is protected. As with pensions, any funds and interest earned in a 401k during a marriage is considered marital property so you need to use due diligence in making sure this is handled properly, both from a legal and a financial prospective.

Finally, at some point you’ll reach the age where you are able to collect Social Security retirement benefits. Not everyone realizes that – if you are divorced and your marriage had lasted more than 10 years – you can receive Social Security retirement benefits based on your ex-spouse’s earnings. That holds true even if your former spouse has remarried.

There are, of course, provisos to this, most notably that you must be unmarried and be over the age of 62. You also need to prove that the benefit you’d get based on your own work history would be less than the benefit you would be entitled to based on your former spouse’s work history. If you meet these requirements, you will be entitled to a Social Security payment that is 50% of the amount of the Social Security benefit your former spouse receives.

This can be beneficial to people who either have worked in lower-paying jobs than their former spouses or were stay-at-home parents with fewer working years. And it’s important to note that if you choose to collect benefits under your former spouse’s work history, it will not affect in any way the amount of Social Security benefits your former spouse (and his or her new partner, if they’ve remarried) is entitled to collect. A good analysis of this can be found on the Social Security Administration’s website.

While many things we’ve discussed in these articles can be managed through discussions with your spouse, it’s ultimately going to be to everyone’s benefit to have both legal and financial professionals work with you to ensure that your interests and your children’s interests are completely protected.

Women and Divorce – What You Need To Know – Part 1

No one gets married with the thought that it won’t last. But the reality of our world is that – at least in America – 1 out of 2 marriages ultimately ends. And that can be particularly challenging on many levels: emotionally, physically, logistically and financially. Although I’d love to share my thoughts with you on the emotional toll this takes on a person, I’m afraid I don’t have my Love Doctor credentials up-to-date. But I can and will share with you the things women need to consider and manage if your marriage is ending.

What you do and when you do it depends on a lot of things. If you’re an empty-nester, then you can focus on just moving your own life forward. But if you’re a woman with children still at home, that carries with it a lot of additional financial and logistical challenges you need to very carefully consider.

Since one of your main assets is your home, if it’s owned jointly, you’ll need to decide whether you (or your spouse) want to keep it (and buy the other person’s share of the house). With the state of the housing market still in recovery, you may want to consider renting out the house until home values have come back up and you’re in a better position to sell. Or you may decide that selling it now and moving on is the best plan.

Looking at this type of decision in a non-emotional way is often very difficult. It’s easy to see why women (and men, as well) have an emotional attachment to their home. It’s where they raised their children. It is their sanctuary, the place where friends and family have come and shared good times over the years. But it’s important to try and remove the emotion from your decision. The real estate world we live in today is not the world we lived in when you bought your home, whether that was 40 years ago or 5 years ago

Even if you own your home outright, would you (or your spouse) be able to buy the other party out of the home if you or your spouse wanted to stay in it? That might be a very difficult thing to do. And if one of you is able to do that (and let’s assume that’s you), would you be able to pay all of the house bills on your own? A mortgage, real estate taxes, utilities, maintenance? In these days, it’s often difficult enough to keep a house up and running on two salaries. Imagine how difficult it might be to do it with just one salary.

The next thing you need to do is close any type of joint credit cards or lines of credit you have immediately. Faster than immediately if you can. Here’s why. If a debt is in both your names, you are both responsible for it even if only one person actually incurred the debt. And if you have a line of credit, or credit available on a credit card, the other person can – unless the account is closed – continue to add debt to the account, make a late payment or maybe not even make the payment at all. You will be responsible for all of this legally and your credit score will take a hit because of your spouse’s actions.

Get in touch with your creditors and let them know you and your spouse are getting divorced so they can notate your account. Write them a letter confirming that notification and let them know you’re not going to be responsible for any additional debt added to the account. While some creditors may balk at closing down the account without the consent of both parties, you can ask that they suspend charging privileges so that there’s no opportunity for the debt to increase.

Next time we’ll talk about other things you need to mange pro-actively during a divorce, including health care, legal documents and life insurance.

Life Insurance – No Matter What Your Situation, You Need It.

Life insurance is one of those topics we don’t like to think about or talk about. Thinking about it means you’re facing your own mortality. But the reasons to have it are many and – no matter what your situation – it’s one of the most basic things we can do to protect our loved ones.

Many people who work have the option of purchasing a life insurance policy through their company equivalent to some multiple of their salary at a relatively low-cost (because it’s group coverage). But if you leave your job, the coverage doesn’t follow you. And if you retire from your job, you may be able to continue the coverage but for a much higher rate (or for much less coverage).

So relying upon life insurance from your company – particularly in our still-recovering economy where none of us is guaranteed a job tomorrow – is not enough. Whether you’re single, or married but have no children, or a stay-at-home parent with no income coming in, or a retiree on a fixed budget, you still need to buy life insurance.

Think of the situations your loved ones can and will face in the event of your death. Some of the costs are obvious. There are the emotional and financial costs of a funeral. It can be very easy to run up many thousands of dollars in costs for a funeral from the fees charged by funeral homes and cemeteries, to the costs for flowers and limousines. Having life insurance available to defray some of these costs will be a great help to your loved ones (at a time when not only are they particularly vulnerable but might not be at their most clear-headed in making sound financial decisions).

It’s also possible that someone who dies may have unpaid medical bills and these don’t disappear just because the patient has died. The proceeds from life insurance policies can be used to settle these debts.

If you own your house and have a mortgage, unless your bank has required you to have private mortgage insurance, the balance of the mortgage will become due if you die. If you want your house to pass to your heirs free and clear of debt, it’s imperative to have life insurance in a sufficient amount to cover that debt (and any other debt you may owe as well, whether it’s credit cards or a car loan or student loans).

Particularly when you have a family, whether you work outside the home or are a stay-at-home parent, replacing your lost income (or the value of all you do for your family) should you die is imperative. Being able to provide a regular source of income that will allow your family to stay in their home, or your children to go to college, is one of the great benefits of having life insurance. If you’re retired and living on a pension or Social Security benefits, it’s likely your spouse would lose some of those benefits upon your death and life insurance can help fill that gap.

The sooner you purchase life insurance, the less expensive it will be. Term life insurance is one of the least expensive options you can pursue and if you’re in relatively good health and don’t smoke, you can get an excellent premium that will secure you a significant amount of coverage. You can easily get a quote through a site like SelectQuote Life and get help making an informed decision not only about how much life insurance you need but how to buy it at a premium you can afford.

Protecting your family and your assets is one of the greatest gifts you can give to them. It’s never too soon – and it’s never too late – to look into buying life insurance or buying more life insurance.

Why You Shouldn’t Get A Medical Credit Card

Suppose you’re tired of wearing eyeglasses or contacts so you think you may want to have LASIK vision surgery. Or you decide you want some cosmetic surgery or get cosmetic veneers on your teeth to improve your appearance. Or even get a hearing aid to better hear what’s going on around you.

And then you realize that your medical insurance is not going to cover virtually any of the costs associated with these procedures and that many of them can cost many thousands of dollars. What are your options?

Well, if you’re employed and have the ability to set up a flexible spending account (FSA) at your job, you can put aside a set amount every week tax-free and accumulate the money that way to help you pay for the medical procedure you want done. But what if your company doesn’t have that option, or you buy your own health insurance, or don’t have health insurance at all?

Welcome to the world of medical credit cards. They’re the equivalent of store credit cards which means they sound like a great idea and then you realize – often too late – that getting one and using it was the wrong decision.

In December 2013, GE Capital (which owns CareCredit, the largest issuer of medical credit cards in America) reached a settlement with the Consumer Financial Protection Bureau (CFPB) to refund almost $34 million to over one million credit card holders to address suggestions and alleged practices about misleading consumers.

Here’s what happens – or allegedly happens – to potential patients at dental, medical, vision and cosmetic provider offices. You’re told you need (or you opt for) some kind of expensive treatment for yourself. (And, by the way, CareCredit also offers this type of medical credit card for veterinary bills so if you have a pet with a health crisis or which needs emergency medical treatment, you’d get a similar pitch).

But therein lies the problem. If you have medical personnel and staff – admittedly not trained well enough by CareCredit in financial matters – offering these credit cards to their patients and possibly not knowing enough or not explaining properly the terms, it results in patients not always understanding what they’ve been offered.

According to the settlement with the CFPB, many patients believed the cards were interest free when, in actuality, they come with a 27% interest rate after an initial 0% interest-free period. If you paid off your balance in full within 6 months or so, there was no interest. But if you even owed a single dollar alt the end of that 6 months, the interest rate would go sky-high and the cardholder would now be charged interest not just on the balance but retroactively on the original purchase amount.

CareCredit was required to notify all the consumers involved that they had the right to file a claim seeking reimbursement of interest charges and fee. (CareCredit did not admit any wrongdoing and a look at their website doesn’t show, as far as I could see, any information on this at all).

Let me fill you in on a little secret. Many medical and health providers understand that sometimes you don’t have the money to pay a huge bill for varied reasons. If you’re in that situation, don’t get a medical credit card. Talk to your medical provider and ask them if they’ll let you pay off your balance over time. I’ll give you my real world example.

Because I had to buy my own health insurance (and if you’d like the story of why I have to, send me a note and I’ll fill you in), I had a high deductible to help keep it affordable. When I was hospitalized a while back, I owed the hospital $1,000 for the deductible. I called the hospital’s business office, explained my situation and asked if they could help. And they did, pleasantly and very graciously, and allowed me to pay off the bill over 18 months with no interest charges at all. Because medical professionals realize that working with you on setting up a payment plan will much more likely result in them getting their money than telling you “no” and perhaps never getting any money at all.

Be smart. Medical credit cards are not the answer. Ask your medical professional to help you find another solution.