Monday, April 19, 2010

The Financial Tuneup

A tuneup is an expensive trip to the mechanic that is supposed to keep your car in tiptop shape. I’ve never been sure if a tuneup made sense. Today’s cars probably don’t need them, given their newer technology. But what about a financial tuneup? In March, the NY Times ran a cute article called “Thirty-One Steps to a Financial Tuneup.” But who wants to do anything in March? Now that we’re chastened by tax returns and hoping to do better as this year progresses, perhaps this is a good time to consider the list.

The truth is, this is a boring list. Many of the items on the list would take hours of research and they result in no joy, only second-guessing. Insurance, for instance. It’s a good idea to review your insurance, consolidate it, get better rates if you have improved your health, get a volume discount by having your house and your car insured by the same company, and more. But from personal experience last year, I know that doing this takes hours and hours and hours. You’re comparing apples and oranges. This company has a different deductible from this one; this one offers umbrella insurance and this one doesn’t. This one won’t cover any water damage, and this one will. And on and on and on. When you finally make your choice, you worry that you made the wrong one. It's your own little self-induced nightmare. How many of us want to start this kind of project?

Possibly the most interesting part of this checklist is the comments readers made about each item. People recount their own experiences, and since these are not the bland, one-size-fits-all of the initial advice, they give clues to your own personal situation that the checklist does not.

In case you don’t feel like following the link, here’s the NY Times’ list:

1. Save 1% more from your paycheck
2. Reconsider your investments
3. Rebalance your investments
4. Find a better bank
5. Make an extra mortgage payment
6. Open a home equity line of credit
7. Increase your student loan payment
8. Seek a lower-interest credit card
9. Set an automated payment toward your debt
10. Read the rules on your rewards card
11. Cash in your rewards
12. Find a better-earning rewards card
13. Check your credit reports for free
14. Consider a financial planner
15. Pare part of your budget
16. Read your tax return
17. Enroll in a flexible spending account
18. Reread your will
19. Automate your giving
20. Walk a loved one through your affairs
21. Ask your cable company for a better deal
22. Ask your wireless company for a better deal
23. Ask your landline company for a better deal
24. Spend your gift cards
25. Check your life insurance coverage
26. Buy a disability policy
27. Consider renter's insurance
28. Raise your auto and home insurance deductibles
29. Do a home inventory
30. Read your home insurance policy
31. Shop for new home and auto policies

Nothing wrong with working your way through this checklist, but in my case, and I suspect for many of you, some of these items just aren’t relevant. Gift cards? Don’t have any. Rewards credit cards? Don’t have any of those, either. Save 1% more of my paycheck? What paycheck? And that item about opening a line of credit for just-in-case cash is way out of date; banks have been closing these and refusing to open new ones lately. An extra mortgage payment in a year is your vacation. Do you want to skip taking a vacation just to end your mortgage a little sooner? I didn't think so.

Still, I admit that I love checklists, even ones that don't fit me very well. If there's even one action I carry out because I've read this list, the author, Ron Lieber, has helped me. Maybe it's worth following the link and checking out in detail.

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