January 2007

One Kansas City business owner finally sorted through her financial papers after her diamond anniversary ring slipped off while she was filing her statements. She never found the ring, but she did uncover some other assets that were hidden in her financial files.

Those financial tasks you resolve to complete each year — finding the best credit card rate, unloading that loser of a stock, documenting your collectibles to make sure they’re adequately insured — can reward your efforts with more than clean financial files. They can also uncover cash and other assets that are buried among your statements, policies and receipts.

Call it a fiscal spring cleaning: Make this the year you finally take care of all those financial tasks you’ve been avoiding.

“Completing your financial projects at the beginning of the year means you get to start off fresh,” says Michelle P. Long, CFP, vice president of personal financial services for Northern Trust. “It also gives you a chance to plan for the next 12 months. For instance, your budget may be affected by how much you’ll need to put away to fully fund your 401(k) plan this year.”

Here are some fiscal tasks to check off your list this year:

Shop for lower interest rates
If you run a balance on your credit card, make sure you’re paying the lowest interest rate available. Promotional and introductory offers can be as low as … nothing.

“Your credit card company wants to keep your business,” Long says. “So watch your mail for promotional offers. Then call your current card company and mention you’re planning to transfer your balance unless they match the lower rate.”

While you’re at it: Hold a credit-card-cutting party with family and friends. Get rid of your extra cards — and the extra temptation to charge.

Shop for higher interest rates
The Federal Reserve has raised interest rates 17 times since 2004. That’s pushed yields on money market funds — including Northern’s — to nearly 5 percent.

If you’re earning less on your cash, you’re throwing money away. So pick up the phone, transfer your cash, and let your money start earning more money.

Fully fund your tax-deferred savings vehicles
“This is a slam dunk,” Long says. “You’re saving tax dollars and, if your company offers a matching plan, you’ll get free money for every dollar you contribute.”

In 2007, you can invest up to $15,500 in your 401(k) plan — up to $20,500 if you’re 50 or older.

Stop paying for unneeded policies
Life changes, and so do your insurance needs. If the kids have left the nest, you may no longer need term life insurance. If you’ve retired, your old disability policy is just gathering dust.

There’s no reason to pay for policies you no longer need. Cancel your old policies — and invest the premium into your retirement account.

As for whole life insurance, there are tax consequences to cashing out. Your financial planner can run the numbers and help you decide how much of the cash value to withdraw — and how much to leave growing tax-free for your heirs.

While you’re at it: Consider consolidating the policies you still need. If you use a 1035 exchange, you may avoid the tax consequences.

Chronicle your collectibles
Do you have a roomful of turn-of-the-century pottery? A closet packed with antique textiles? A full set of Warhol prints?

If you don’t document your collections, chances are your insurance policy won’t cover them if they are lost, stolen or damaged.

So shoot photos or videos of your treasured pieces. Have an expert formally place a financial value on them. And call your insurance agent to make sure they’re covered.

Financial software like Quicken® can make it easy to create a visual inventory of your valuables.

Side bonus: If you decide you can live without Great Aunt Judy’s Lladro collection, you can find it a new home — and further fund your own passions — by selling it on eBay.

Unload your losers
Are you still holding onto your Dot.Coms.R.Us stock, waiting for it to rise again? Let it go.

Can’t bear to sell the shares you bought in 1996 for $100 for 13 cents today? Let them go.

If your investment isn’t likely to perform well in the future ... let it go.

You’ll reallocate your resources to investments that are more likely to pay off in the future. Be sure to talk to your financial advisor who has access to the proper research for stock performance. Plus, in some cases, you can deduct your losses on your tax return.

So let ... it ... go.

Claim what’s yours
“One of the easiest ways I unearth hidden assets for my clients is by searching for unclaimed property online,” Long says.

It’s easy: Just visit unclaimed.org to search databases for money and property owed to you.

“It might be interest from a checking account you’ve closed or a property tax refund check that you never received,” Long says. “You might find anywhere from $50 to tens of thousands of dollars you didn’t know you were missing. And it only takes a minute or two.”

Happy hunting
Call it a New Year’s Revolution: Make 2007 the year that you finally get fiscally fit. Clean up your financial files — and you just might clean up financially, as well.