Bajtelsmit Column: Financial Housecleaning for the New Year

Note to Editors: Vickie Bajtelsmit is a finance professor in the Colorado State University College of Business and the author of three personal finance books.

I always have fairly optimistic plans for what I’ll accomplish over the holidays. Unfortunately, the attractions of visiting with friends and family and baking high-calorie cookies often win out over more mundane tasks like cleaning out my closets.

Financial plans are kind of like household cleaning plans.  They don’t happen unless you schedule them in and force yourself to stick to that schedule.  

Most people have several financial "to dos" that never seem to get done. Why? Obviously, because these tasks are generally no fun at all. They involve paperwork, waiting on hold, and often cost us money we’d rather spend on after-Christmas sales.  

January is as good a time as any to do some financial housekeeping. If you’ve recently had any changes in your life, such as a birth or death, marriage or divorce, new job, or a move, you should schedule time to review all aspects of your financial plan. Evaluate your cash management and budgeting, tax planning, investments and retirement planning, auto and homeowners insurance, life insurance, wills, estate planning, and college savings plans.  

I’m no different from you. This year, I have a bunch of financial housecleaning to do because 2008 was a year of many changes for me.  Both my children are finally on their own (well…sort of) and I was officially divorced in late December.

I sat down last weekend and made a list of all the things I need to do to reflect my new life circumstances. Then, I wished for an extra week of vacation to accomplish them.  As a more realistic alternative, I decided to get one item on the list done each day this week.  Unfortunately, I’m already a day behind.

Here are some things from my list that should be on most of your lists as well:

1. Revise will.  About half of all adults have no will and many have wills that are out of date. You should revisit your will every few years to be sure it is still valid and correctly reflects your wishes. After a divorce, death, or marriage, a change in primary beneficiary might be necessary. You should add a guardian for any minor children or remove those provisions once your children become adults. .   

2. Review beneficiary designations (who gets it if I die) on life insurance, bank, and retirement accounts.  It’s advisable to check your beneficiary designations periodically. If you have identified one child as a beneficiary, but now you have three, you can take action to reduce conflict between the children upon your death (unless cutting the other two out was your intention). If you get divorced, you probably no longer want the accounts to go to your ex.

3. Review life insurance coverage. Although most people have too little life insurance, I find that I now have too much. I was previously insuring my family against the loss of my earning power in the event of my death. Before they were finished with college, this was also insurance that my sons would be able to complete their schooling. Since they are no longer my dependents, the only one who should care about my earning capacity right now is Zubi, my dog.  

4. Revise health insurance, auto insurance, and cell phone plans to reflect household changes. Most family plans requires that household members on the same plan be dependents of the primary person and share a primary residence. As your children leave the nest, it’s time to pass that buck to them.  

So what do you think the odds are that I’ll have gotten all these things done by Friday?