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Your Funds: 4 financial chores to tackle before things get ‘normal’
Your Funds

Your Funds: 4 financial chores to tackle before things get ‘normal’

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Throughout the pandemic, people who were mostly stuck at home took on burdens and household tasks they had let slide, and accepted challenges to clean up, complete chores and generally stay active and involved. They tackled self-improvement ideas; they made beef jerky and bread and pies (though not at the same time).

Now, with COVID-19 vaccinations ramping up, it’s easy to envision a return to a freer, pre-pandemic lifestyle.

In the gloaming of the pandemic, however, consumers should do financial chores, making their lives a little easier — and potentially less stressed — come the new normalcy.

Here are four things to do while your ordinary activities remain limited, because there’s no way you are completing these tasks once you’re feeling normal and they are easy to ignore, the way you have done for years.

Clean out unnecessary financial papers. Spring cleaning financial files is easy; you won’t toss anything that’s important if you know the basics.

With old tax returns, cut them down to a small stack of papers as they age (provided you’re not filing fraudulent returns, as there is no statute of limitations in tax-fraud cases).

Keeping tax returns forever — especially from years when you bought or sold property — isn’t a bad idea (although if a tax preparer does your return every year and has copies, your files are redundant), but hanging onto “support documents” — files of bills, receipts and clutter on which you based your math — creates a paperwork monster.

Support docs must be kept for three years after a return is due. Thus, when you put your 2020 return in the filing cabinet this year, purge the receipts/junk from 2016 and earlier returns (2016 taxes were due in 2017, so their holding period ended at the start of 2021). If you’re particularly cautious and have multiple sources of income, keep forms related to income (such as 1099s and W-2 forms) for six years. That’s how long the IRS can challenge returns it thinks gross income was underreported by 25% or more.

For investment paperwork, brokerage and investment firms started in 2011 keeping cost-basis information on stock purchases, mutual funds, options, bonds and other securities. If cost information is on your statements, you can get rid of trade confirmations and most of your old statements; keep your year-end statements only, as they typically show all activity in your account for the year.

Shred the old pay stubs — though your last one from the year may come in handy for cross-checking tax reporting — along with bank statements, canceled checks, credit-card statements and consumer bills/receipts. If you don’t need it for tax-reporting purposes, it’s almost certainly fodder the fire.

The exceptions: In divorce cases, records can be important in determining who pays a child’s bills and, therefore, gets to claim a dependent on tax returns. Warranties and buyer-protection plans may require a purchase date or receipt; put your receipt with the owner’s manual and keep it there until the protection expires or the product is gone.

Keep bills affected by disputed charges, fraudulent card use or other problems — along with notes on how and when those issues were resolved — just in case negative information from the incident shows up on your credit report.

Update your beneficiary designations. Many families suffered losses during the pandemic; if yours was one of them — if any circumstances have changed since you opened your accounts — make sure you have designated beneficiaries and that the choices are current.

If necessary, it’s a fast fix now that will save your loved ones major headaches later.

Review your coverages, subscriptions and recurring charges. The pandemic encouraged consumers to sign up for ways to save on repetitive purchases, to try new services and more. Don’t keep paying for those things if they aren’t part of your return to normal.

Contact your insurance agent to update coverage, making sure it reflects changes in habits caused by the pandemic. If, for example, you no longer commute to the office and put much less mileage on your car — and don’t foresee that trend reversing — adjust your insurance to reflect the reduction.

Make sure you’re not being billed for anything you signed up for but haven’t used recently.

Try a “no-spend challenge.” Pandemic life has tested your finances, but here’s one more challenge to tackle before real life returns.

As the name implies, a no-spend challenge involves restricting your spending over a period of time to just essential items. The effort not only saves money, but also combats impulse buying and can change spending habits. It encourages you to use — and get your money’s worth from — items you may have stockpiled during pandemic.

Give yourself a goal: Maybe you put the savings toward reducing debt or paying for a big purchase you need to make, or perhaps it’s to eliminate impulse spending or to enhance budget control. Having a purpose will make this easier.

Next, reduce your spending to the bare essentials: rent/mortgage, utilities, insurance, gas, groceries, etc. Minimize them, too, if possible. The point is to eliminate spending on anything that’s not a need.

Pick a time frame (I consider a month ideal, but you can see the impact in as little as a week; a year is tough) and establish your rules. That includes any “cheats” (i.e., one restaurant meal per month), and deciding where the unspent money will go.

Get everyone who needs to know or who can help you in on the plan (tell friends who may wonder why you seem reluctant to participate in certain paid nights out or excursions as things open up).

Look for progress, and for a minimum of perceived pain; that will help you re-evaluate spending once the challenge is complete.

Coupled with the reopening, all of these items will help to make for better days ahead.

Chuck Jaffe is a nationally syndicated financial columnist and the host of “MoneyLife With Chuck Jaffe.” You can reach him at itschuckjaffe@gmail.com and tune in at moneylifeshow.com.

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