Below are six tips to help you cut financial clutter.
1. Prepare an inventory. First, make a list of all your financial accounts. Then gather all your financial paperwork in one place and organize it into three piles: One to keep hard copies of, one to keep digital copies of, and another to get rid of completely.
2. Shred, shred, shred. Much of the paperwork you’ve been hanging on to for years can be thrown away. Tax returns can usually be disposed of after three years, though in some cases (like if you’re
self-employed) you’ll want to keep them for a longer period. Credit card statements can typically be shredded once you’ve confirmed there are no erroneous charges. Loan documents can be shredded once you’ve paid off the debt.
3. Get a scanner. Invest in an affordable scanner and make digital copies of records you want to retain but don’t need originals of, like health records, old tax returns, and Social Security
statements.
4. When possible, consolidate accounts. Having numerous financial accounts is a major source of clutter. Do you really need multiple savings accounts at different institutions? Do you
have several different 401(k)s from old employers? Do you own half a dozen credit cards but only use one or two? When possible, streamline and consolidate. Not only will this make things easier to manage, but you’ll reduce the risk of forgetting accounts and eliminate
extra fees.
5. Automate your finances. Reduce the amount of clutter coming in by signing up for online bank account and investment statements. However, because some banks may only allow you to access the past several months of statements,
you may want to download the records and save them elsewhere. When possible, automate bill payment and paycheck deposits.
6. Get an online vault and home safe. Personal computers can be compromised or stolen, so you may want to add an extra layer of protection by storing your financial information in a secure online vault. A fireproof home safe is a good place to store items you need to maintain original copies of. Marriage and death certificates, deeds to your home, car titles, Social Security cards, and copies of your will are all items commonly stored in home safes.
Factors Impacting Your
Asset Allocation
While you probably won’t make frequent changes to your asset allocation strategy, changes in your
personal situation may necessitate periodic alterations:
Risk tolerance — Your risk tolerance is likely to change, either as you become more familiar with
investing or as you age. Familiarity with investing typically makes you more risk tolerant, while aging may make you more or less risk averse. Adjust your asset allocation when your risk tolerance shifts, so you don’t become uncomfortable with
the risk in your portfolio.
Return needs — Your need to emphasize income or growth is likely to change over your life. Young
investors typically want to emphasize growth, while retirees may want to emphasize income.
Investment time horizon — With a short time horizon, your liquidity needs may require avoiding
more volatile investments. With a longer time horizon, you can wait out any fluctuations in volatile investments. Typically, young investors have longer time horizons than older investors, so they can invest more aggressively.
If you would like more information or to discuss your financial concerns
Financial Thoughts
Approximately 57% of investable assets are controlled by investors age 60 and older (Source: Journal of Financial Planning, May 2020).
A study of 2.8 million trading accounts over the period from 2010 to 2014 found that individual investors tend to trade as contrarians around company news announcements. Investors sold stocks on large positive earnings surprises and bought stocks following negative large earnings surprises. During the trading period, individual investors strongly decreased their holdings of individual stocks (Source: AAII Journal, May 2020).
A recent study found that value investing strategies have suffered over the last decade due to a lower relevance of stock fundamentals to returns. Fundamentals matter to stock returns, but there are periods where stock prices become tenuously linked to fundamental data (Source: AAII Journal, May 2020).
A study found that riskier companies that hire retirement-age CEOs are more likely to increase their performance when those CEOs are hired in distressed times. These CEOs tend to take on less risky projects and cut spending to help the company (Source: AAII Journal, May 2020).