Who among us hasnâ€™t needed a mental health day at some point in our lives? In the vernacular, this just suggests a day where we take the day off from our work and household obligations to do nothing but relax. And relaxation isnâ€™t the only reason we take little time-outs from our daily lives: we call in sick to take care of our medical issues and we leave work early to watch our kidsâ€™ sporting activities.
But most of us donâ€™t set aside the time we should to manage our personal finances - and managing them effectively definitely requires some time and attention.Â
Next time you get a personal day off or are on vacation, consider declaring it your â€˜Financial Health Dayâ€™ and spending at least half the day tending to your money matters with laser beam focus. Ideally, do it on a weekday (and not a holiday), when the various financial institutions and vendors you may need to contact will be reachable via phone.Â
When youâ€™re ready to take your Financial Health Day, get organized by listing the things youâ€™ll want to handle that day line by line â€“ donâ€™t forget to include the following:
Also, watch for auto-paid bills that have increased without your noticing, and give the providers a call to figure out why they went up and/or otherwise decide how you want to get them under control. Common offenders include home and auto insurance, cell phone bills, utility bills and the like.
One more thing â€“ if you are so inclined, consider setting your checking accounts up on a service like Mint or Manilla â€“ these free services not only allow you to manage multiple accounts in one place, they also offer instant charts and graphs that surface where your actual spending patterns may not jive with what you say your priorities are. For example, you might tell the service that your food bill should be 10% of your monthly spending or less; the service may tell you, in turn, that youâ€™re actually spending 15% of your cash out on food. Auditing your accounts for spending that is out of whack in this way can supercharge your cost-cutting goals.
2.Â Â Â Â Â Â Check your mortgage interest rate. The going rate for a 30-year home loan this week is 3.57 percent, according to Bankrate; 15 year mortgages are running at 2.97 percent. Â (These are prime interest rates, which take A-list credit scores and ample home equity to obtain.) But that doesnâ€™t necessarily mean that every homeowner with a mortgage rate over 4 percent should refinance!Â Refinancing your home loan can cost money, and it definitely extends the life of your mortgage (unless you make an intentional, strict plan to pay it off early). Talk with your financial planner and mortgage professional to do the math and see whether you should consider refinancing your home loan. Â (Hint: set your FHD to-do list up in advance, so you can make appointments with these and other professionals for that day.)
Additionally, keep one important thing in mind: your mortgage interest is the basis for the largest tax advantage of homeownership. If you refinance your home loan for one with a dramatically lower mortgage interest rate, you need to account for the possible increase in income tax liability that may result â€“ it may offset some of the monthly savings you realize.Â Again, your financial planner and CPA should be able to help you calculate and plan for this, before you make any moves.
3.Â Â Â Â Â Â Check your PMI.Â If you put less than a 20 percent down payment into your home when you bought it, you were likely required by your lender to have a Private Mortgage Insurance (PMI) policy.Â PMI â€“ insurance that protects your lender in the event you default on your mortgage â€“ is not cheap. It can add hundreds of dollars to your monthly mortgage payment. FHA loans have their own version of PMI called a mortgage insurance premium, or MIP, which can run even more than PMI!
Fortunately, when the combination of paying the balance down and increases in its fair market value results in you having at least 20% equity in your home, you might be eligible to have the PMI removed from your mortgage loan, so you can stop paying for it. Â Even more fortunately, home values have been on the rise in many areas at a much faster rate than at any time since the recession. Your Fiscal Health Day is the perfect time to talk with your mortgage professional and your lender about what it will take to get the PMI removed from your home loanÂ - you might even get a truly pleasant surprise and find that youâ€™re eligible right now!
(Side Note: FHA loans with less than 20 percent down are required to have MIP for the first five years of the loan, regardless of how much the homeâ€™s value increases.)
4.Â Â Â Â Â Â Check your insurance.Â Gather up your homeownerâ€™s and other insurance statements, or call your agent(s) up and ask for a review.Â What you want to do is make sure that (a) youâ€™re appropriately insured for your exposure, and (b) you arenâ€™t paying more than you need to. Â Things like dogs, household staff, pools, your roof materials and your travel habits all may impact what amounts and types of insurance policies youâ€™ll need. Â Talk with your insurance agent and your financial planner, if you have one, to sort these matters out, and donâ€™t be afraid to shop around.
5.Â Â Â Â Â Â Check your phone, cable and internet bills. Â I had the same home telephone service provider my whole adult life until a couple of months ago. I decided I no longer needed a land line, but wanted to continue my internet service. Boy did I get the run-around when I called to make that change! So I hung up and called the number for a competing service provider about which I had heard rave reviews from my friends. After less than 20 minutes on the phone, I ended up switching services entirely and got home phone service, internet service and cable â€“ including premium channels â€“ for about 50 percent of what I had been paying for cable alone!
Donâ€™t let brand loyalty or inertia cost you hundreds of dollars a year. Reevaluate your phone, cable and internet services at least every other year â€“ you might be surprised at how increased competition among vendors and the practice of â€œbundlingâ€ these services has brought prices down, and service levels up. My internet is twice as fast as it was before, and I havenâ€™t had one day down since I made the switch.Â One caveat â€“ do watch for discounted introductory rates that increase substantially six months or a year into the relationship.
6.Â Â Â Â Â Â Check your savings.Â Do you have an automatic savings plan in place?Â If not, Financial Health Day is a great day to set that up with your bank.Â If you do, itâ€™s the right time to do a gut check: would it kill you to save an extra $50, $100 or $200 a month?Â If you can afford to, tweak your savings on Financial Health Day.
7.Â Â Â Â Â Â Check your credit.Â Pull your own credit reports from all three bureaus via AnnualCreditReport.com. Scan the reports for any inaccuracies and any delinquencies that should have aged off your report but have not (7 years for most, 10 years for bankruptcies). Then, initiate disputes for any of these things you find. This can take some time, but Financial Health Day is the perfect opportunity to assertively manage your credit before youâ€™re in refinance or home buying crunch-time.
8.Â Â Â Â Â Â Check your debt. Â Monitor all of your debt â€“ from your mortgage, to your consumer debt to your student and auto loans â€“ and put a plan in place for getting rid of as much of it as you can, as soon as you can.Â Can you afford to make an extra payment toward your mortgage?Â Can you pay that credit card off?Â As youâ€™ve worked through the rest of your finances, you have likely â€˜foundâ€™ money, which youâ€™ll now be saving and can redirect toward the very worthy aim of debt elimination. So, do!Â Maybe youâ€™ll find enough to pay something off outright â€“ if not, perhaps you can use your Financial Health Day to set up a recurring extra payment or modify your existing auto-payments to increase them by even a small bit. But if all you can do is make a modest extra payment toward these things on your actual Financial Health Day itself, youâ€™ll still end the day a little further ahead than you were when you got started.
And thatâ€™s not all!Â There are plenty of other financial matters that make sense to allocate time and energy toward on Financial Health Day, from your estate planning to your investments. New York Times writer Ron Lieber has put together a resource-rich set of materials, including videos and a customizable checklist, for what he calls a Financial Tuneup â€“ use them to round out the rest of your Financial Health Day or, if youâ€™re like me, to set your agenda for Financial Health Day #2!