I commented on Baker’s post that I was surprised that Discover waited that long to contact them.  (Perhaps they didn’t wait at all regardless.)

Businesses owe your heirs no special consideration

My grandfather died a few years ago.  It was very shortly afterwards that the agent for his homeowner’s insurance policy called my mother to inform her that the premiums would increase because it was now a vacant home.  My mother gave the agent an earful (she had grown up with him), saying that he had been a good customer for decades and that they were canning his policy before he was ground temperature.  The agent gave her a sympathetic ear, but the risk to the property does go up if no one is living there, and hence the premiums should go up.

Business relationships are just that: business.  It’s nothing personal.  And that’s just why situations like what Ms. Townley experiences leave a bad taste in people’s mouths:  there sometimes is almost no personal touch that’s expressed.

But when a customer outcome (how’s that for a business euphemism!) severs the relationship with the business, it would be unwise for the business to continue on as if nothing had happened.  In the case of my grandfather’s insurance company, they’d be taking a risk that’s not adequately compensated for the premium.  In the case of banks seeking to settle credit accounts with the heirs of deceased cardholders, they only have a short window anyway to recoup anything at all.  If they wait around until the heirs have grieved, then (a) the heirs still won’t want to pay the deceased’s credit card bills and (b) there may be no money left in the estate to pay them with anyway.  It’s the quick creditors that get their money, not the considerate ones.

It’s a matter of legacy and preparation

To be fair, I’ve been caught on the receiving end of “businesses just taking care of business” (though thankfully I haven’t had to deal full bore with a death in the family yet).  Even the act of changing your address disrupts things.  I’ve missed bills, missed deadlines, and gotten nastygrams because I didn’t update my address with everyone I did business with.  Businesses didn’t really care that I had other stuff going on when I moved.  All they cared about was their business.  And frankly, that’s how it should be.

So, I’ve gotten better at preparing for things that might disrupt payments, cause cancellation of services, or otherwise be inconvenient.  Businesses expect me to pay my bills.

Likewise, when the ultimate disruption comes (death) how I’ve prepared my estate and finances will reflect on my legacy.  If I have things in order, my heirs will indeed have time to grieve, rejoice, whatever.   If I don’t, then it will be a nightmare for them.  They might be tracking stuff down.  Or they might be getting harassing phone calls from banks about my debts.

In any case, it’s up to me whether my heirs are leaving flowers at my grave or spitting on it.  My creditors won’t care one way or the other.

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• Reduce your total number of financial accounts. Just a few days ago my wife was talking to me about closing a couple of our bank accounts that had seen very little activity recently.  I signed up for one because there was a teaser rate on the account for the first six months.  I signed up for another because there was a fairly substantial bounty for doing so.  But now the money just sits there, almost forgotten, without any real good reason.
• Combine financial accounts into one institution. We got business checking accounts at a local bank a few years ago only because our credit union didn’t offer them at the time.  Now that out credit union does, we’re looking to transfer them over there.  It’s not because of any dissatisfaction we’ve had with the other bank, but it’s nice to go to one place for all of our local banking, business and personal.
• Find an effective financial tracking system. Check.  We’re using Quicken to organize for taxes, and beyond.  There’s start-up time of course, but once the catch-up work is done it will be far easier to use this tool.
• Establish a good filing system. Financial papers turn into a paper monster without a good filing system.  We’re getting better about doing e-statements and with scanning our documents to get them more accessible.
• Keep a regular schedule. Man, this is so true.  The financial grunt work is truly intimidating if it piles up for too long.  (I’m more than a little relieved that it caught up with Craig and his wife, too.  I’m glad I’m not the only one!)  The schedule that worked for him was 15-30 minutes once a week.  I’ve heard other people say that once a week is about as long as you’d want to go; two weeks is too long for one of my colleagues to go without running through his transactions.  As for tracking and remembering cash transactions, those should probably be written down every day because they get forgotten about very quickly.  (As an update to that post, I did manage to write down most of my cash transactions, but not all of them.  Boo on me.)
• Always have a notebook handy. This advice is good in the general sense as well, but especially for money stuff.  God is in the details, but the devil is in the details that are forgotten about.

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Once the transactions for our primary checking account were entered, and the balance was reconciled, it’s time to start entering the transactions for the other accounts.  If just biting the bullet and getting started in the first place was the ugliest frog on my plate, going through about thirty pages of credit card transactions for last year’s charges to our primary credit card has got to be the second-ugliest frog.

Our primary credit card’s transactions was a big chunk of work, for sure, but between the checking account and this credit card I can now paint some broad strokes about how we spent our money last year. We did use cash now and then, but our checks and our credit card accounted for the large majority — most –of our cash flow.  We got a clear picture of our big spending weaknesses, the most glaring of which was how much we ate out last year.

Note:  these are broad strokes.  I had a year-end summary of transactions in front of me, which I transferred into Quicken.  This year-end summary has dates, merchants, and amounts.  I didn’t track down then whether my purchases at Sheetz were gas, or food.  Our trips to Costco could have been groceries, electronics, books, gifts, or household items, but again I didn’t get the receipt out then to check.  Right now purchases from Costco are all “Groceries” even though I know they’re not.  Purchases at Sheetz were “Auto:Gas” if the amount was about $20 or more, and “Dining” if the amount was well under $10.  I could have gotten some of these categories wrong.  But for broad strokes, they’re approximately correct, which is all you can expect from broad strokes, anyway.

Will I stop at the broad strokes?  No.  I have boxes of receipts that I can match up with the credit card charges and the checks to add some shading and detail to the big swaths of financial color.  I’ll need to do this for any numbers that will go on our taxes, because the closest that the IRS gets to “broad strokes” is “rounding to the nearest dollar — but only for amounts that are entered on the tax form.”

So just as a recap, here’s what I did to get the broad strokes of our spending for the past year:

• I entered the transactions from the account where we had our biggest cash flow. This was one credit card.  It was convenient to have a year-end summary that had all of the transactions for the previous year, roughly categorized.  If we didn’t have that, we could fall back on our monthly statements.
• As I entered them, I tried to get the category of spending roughly correct. A trip to Costco can mean a purchase of a bunch of different kinds of things, but “Groceries” was close enough.  What we bought at Costco were mostly groceries, and that’s fine for a first cut.
• I left detailed category splitting for later. Just like I didn’t get distracted with entering all of the transactions from other accounts when I was getting started, I didn’t hunt for receipts at this point.  Doing that will come later when I can concentrate on it.
• This took a few nights, but doing a few pages each night was manageable. That’s one of the benefits of starting a little earlier than the first week of April: there’s time to do it right, at a pace that won’t bore an ulcer in your stomach.  I didn’t have to push myself so hard that I lost concentration and started making a lot of silly mistakes.
• After entering all of the transactions, I made sure the amounts were correct. I only found a half-dozen errors in about one thousand transactions.  I made use of the “cleared” checkbox in Quicken accounts to mark off the amounts I had checked.  I’ll use it again when I find the receipts for our transactions.

So now I have well over 90% of our financial transactions in Quicken, with rough allocations to categories.  The next steps are to fill in the transactions for the rest of the accounts, and then work on breaking down the transactions using what receipts we have.

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This series of posts, entitled “Organizing for Taxes and Beyond,” will follow through the process I use, warts and all, to gather my financial life into some semblance of organization so that I can track our family’s income and expenses so that we can make concrete, realistic goals.

The tool I’ll be using is Quicken Rental Property Manager.  (I have the 2010 version but the 2011 version is the current one.)  My goal with entering my financial data into Quicken is to enlist its help as much as I can for completing my 2010 taxes.  Since I became a landlord this past year, I’ll be needing to fill out more tax forms in more places, so any help I can get from the software will make things easier.

The rest of this post will step through how I constructed the accounts I needed in Quicken by entering my 2010 transactions from our primary checking account.  Sleeves are rolled up, so here we go!

1. Created a new Quicken file, and created the primary checking account with the starting balance as it was at the end of 2009. Faced with having to import everything from the past year into Quicken, I started with our primary checking account.  Transactions from this account touch a large majority of the rest of our accounts, so if I can manage to enter the transactions properly for that account, I’ve gone most of the way to setting up the rest of the accounts as well.
2. Started at the beginning of 2010, and began entering transactions from the checking account statements. Now it’s just a matter of getting to work: start at the beginning and move forward.  I enter as much about the transaction as I can from the account statements and the check registers.  For checks written against the account, as well as electronic fund transfers (EFTs), I tried to get the payee and the expense category correct (in addition to the amount, of course!)  If I didn’t know for sure, or if it was possible that the expense could fall into more than one category, I categorized the expense as “Not Sure” — yes, there is a category called “Not Sure” in Quicken! — or I noted this in the memo section of the transaction.  I’ll work on figuring out these missing pieces of information later from the receipts.
3. When I hit a transfer into, or out of, another account that I wanted to track, I created the account. The first month’s worth of checking account transactions took most of an evening to do, because one transaction could trigger the creation of several new accounts (in Quicken).  My first three transactions of 2010 were (a) a mortgage payment, (b) a Prosper.com transfer, and (c) an ING Direct transfer.  The first transaction triggered two accounts: an asset account for the house, and a loan account for the mortgage against the house.  The second transaction triggered creation of an account to hold Prosper.com loans.  (This account is now a “placeholder” account; I track transfer of money into and out of the account, but do not track the individual loans yet.)  The third obviously required creation of an ING Direct account.
4. I created accounts, but I didn’t enter any other transactions that didn’t involve the main checking account. To keep things simple and straightforward, I didn’t enter transactions that didn’t involve the main checking account.  This means that all of the accounts (except the main checking account) will have an incomplete set of transactions when I’m finished entering the transactions for the main checking account.  This is all right.  I’ll revisit all of the accounts to enter transactions.  It would take too much time to shift gears entering transactions for a bunch of different accounts.
5. I took the time to track the details of my paycheck. I could track only the net pay from my paychecks, but by tracking all of the taxes and deductions I can have Quicken do some heavier lifting with tax preparation as well as report creation for retirement accounts and flexible spending accounts.  Saving my paycheck as a “scheduled transaction” in Quicken made editing later paychecks fairly easy.
6. For credit card payments from the checking account, I created the credit card accounts, but held off entering purchase transactions for those accounts. Again, I didn’t want to get sidetracked, so I followed the reasoning as in Step 4.  I have credit card accounts that have large positive balances (I’ve made payments from the checking account, but haven’t entered any purchases!)  The purchases from my main credit card will be entered after I’ve done the transactions from the checking account.
7. After entering six months’ worth of transactions by hand, I downloaded the rest from my credit union’s website. Six months were all that was kept, but correcting the imported transactions and recategorizing them was pretty quick by comparison.  I rocketed through the last three months of the year.

Now, I have a fairly complete set of transactions for our primary checking account, and have created accounts for many other linked areas of our finances.  The next task will be to enter the transactions from our primary credit card.  It’s this account that will contain the large majority of our spending transactions, and it will be the topic of the next post in this series.

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Two thousand eleven will be upon us in only a month.  Here are a few tasks that are worth doing to tie a financial bow on 2010:

• Review your health and dental care choices if you have them available. At many employers it’s open season — that time of year where changes can be made to your benefits that can’t be made at other times of the year under normal circumstances.  Check with the doctors and dentists that you go to frequently for your care to see if they’ll still be taking the same insurance, if they’ll still be in its preferred provider network, etc.
• Review use-or-lose accounts. Pretax flexible spending accounts (FSAs) are use or lose from year to year.  Some employers allow a grace period after the end of the calendar year for using up the previous year’s allotments, but not all.  Review your plan and how much you have left in your FSA to see if you have some spending to do.  Even if you have a grace period, check to see that some of the expenses that are allowed in 2010 aren’t disallowed in 2011.
• Review your withholding. Have you been withholding enough from your paychecks to cover the federal and state income taxes you’ll owe?  There are still a few paychecks left in 2010 to close the gap on what you might need to pay the tax man for all of your hard work.  Underwithholding may result in penalties.  The IRS has a withholding calculator that can help.
• Prepare for filing 2010 taxes. If you’re due a refund for your 2010 taxes, the faster you get your completed return in, the faster your money comes back to you.  Make a list of who needs to send you what tax documents, and by when.  As a guide you can review what documents were sent to you for your 2009 taxes.  That way you’ll know who’s holding up your refund and can get on the horn with them.
• Review possible deductions that you can itemize, and do them before year’s end if appropriate. If you’ll be itemizing your deductions for your 2010 taxes, consider whether it would make sense to take the deductions now, or wait until 2011 to take them.  There are times for which each is appropriate.
• Give some thought to 2011 financial goals. Consider starting work on them now rather than on January 1st.  Michael Masterson’s The Pledge compiles some of his secrets to success and is imminently actionable.

What other year-end financial tasks do you do?

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• The financial statements, bills, and receipts pile up.
• The piles wear down my psyche like coarse-grit sandpaper.
• The papers get filed slowly because I need to relearn my system for filing the papers.
• Eventually, the piles are filed, or at least 80% of them are filed.
• The papers start to pile up again …

I’ve been supremely reluctant to do anything with the paper because it’s guaranteed that if I throw away or delete something, I’ll need it the next week.  That’s happened to me too many times, so I just keep everything.  But I’ve hit wall after wall trying to find a system that makes it easy to organize paper.

My wife sent me a link to the Fujitsu ScanSnap 1500.  I’m really hoping that this ends up being more than a temporary, shiny new toy, but wow, can it ever scan stuff!  It has all of one button on it:  Scan.  Load a couple dozen pieces of paper in the top, and in about a minute it’s gone through the pile, has processed the pages, autocorrected for upside-down pages and pages that I fed into the machine slightly cockeyed, and popped everything into a PDF file.  With a little more crunching, it’s made all of them text-searchable.  The optical character recognition part is killer.  Big text, bold text, tiny text, it found everything I could see on the page.

It comes with another piece of software that rips through business cards with the same ravenous appetite.  It gets a lot of the text and even figures out the correct fields for the information on the cards.  Into a CSV file it goes.

Above all, using the ScanSnap S1500 is stupid easy.  That’s very important, because nothing I had attempted before was as easy as this.

My plan is to scan my papers, organize them roughly by time and by purpose, and then store the originals in a box in case I need them.  (Someone told me that in some cases a scan of a document may not be good enough for certain purposes.)  But at least this will get the mess of papers out of my field of view so that it doesn’t nag at me.  Since I’ve developed my Search-Fu over the years, I should be able to track down what I need fairly quickly if the entirety of the scanned documents are text-searchable.

The ScanScap S1500 is not cheap (about $400) but it jumps through hoops for that money.  Subconsciously I bristled at having to put each piece of paper in a flatbed scanner.  I never entertained it for more than ten seconds.  I doubt many people would, as it’s too slow and labor-intensive.  This scanner makes the proverbial mincemeat out of paper.  It’s fast and effective.

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She took a detour when she noticed that our bill was higher than it usually was, and investigated why.  It was about $13 difference, but $13 is $13 and we didn’t want to let it go without understanding it.  We might expect the price to go up occasionally as prices rise, but we shouldn’t be getting charged for any additional services.  My wife has an unlimited texting plan, and we have plenty of rollover minutes, so our phone bill should be pretty stable.

We tracked down the additional charges to data downloads.  The date and times of the downloads didn’t compute, so I called up AT&T / Cingular customer service.

(A brief aside:  My experience with customer service at AT&T / Cingular today was much better than I remember it being in the past.  I was pleasantly surprised.)

We eventually tracked down what the download charges were for.  Somehow about a month ago we managed to subscribe to, and download, a radio application.  I made sure that it wasn’t someone tethering to our phone somehow.  The customer service rep told me that this didn’t happen by itself; someone must have initiated the download on the phone.  That somebody was probably my wife, accidentally, since she’s hit the wrong part of the navigation wheel on her phone in the past (and caught it before it downloaded anything).

After explaining to the rep that we didn’t intend to do this, he refunded the data fees and canceled the subscription to the radio application, which was kind.  Since both my wife and I were still baffled as to how this happened in the first place, I asked the rep if there was any way we could stop this from happening again.

He said there was.  It’s called a “data block.” Once these blocks were put on our phones, the data transfer capability was disabled until we explicitly enabled them again.  We won’t incur any data charges on our account because we can’t.

The bottom line is this:  If you don’t expect to use data features on your phone, like internet access, then put a data block on your phones. This will protect against doing it accidentally like we did.

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Here’s what I’ve done thus far with my foray into Mvelopes Personal:

• Registered. This was painless, as you might expect.
• Linked my main checking account, savings account, and credit cards. This was also painless.  I chose the accounts from among the ones detected, gave them nicknames, and that was it.
• Specified sources of income. Not too many to worry about at the moment: the paycheck for my main gig and rent from my previous house.
• Specified some expenses. To do a more accurate job I’ll need to crack out bills, credit card statements, etc. to get exact amounts.  There weren’t a huge number of expense categories, but they were well-chosen, and it was easy to add more.

Additionally, I received a phone message from the company with some helpful information.

My next steps will be to tighten up the budgeting section, and to watch the orientation videos.  Once I’ve done that I’ll post again.

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One piece of advice he gives to people who’ve dug themselves into a deep hole is to sell off a lot of the stuff that got them into the hole in the first place using yard sales, Craigslist, eBay, whatever — especially if it’s gotten so bad that the mortgage payments are behind.  Some of the big things may have to go, like “the flat-screen TV, boat, or Harley.”  Depending on how imminent the consequences are, some really tough decisions may need to be made.

But taking a different spin on this, it could also work to sell a lot of little stuff — whether it be shoes, DVDs, Hummel figurines, books, salt and pepper shakers, comic books, whatever.  Stuff that might have brought some pleasure at one time, but now just takes up space.  Or maybe it still brings pleasure, but needs to go to because bills are due.  A nice collection of DVDs can be sold as a lot on eBay for a few hundred dollars (or more).

If the stuff is more of the “now just takes up space” kind, then there’s a nice fringe benefit:  having that stuff gone literally frees up some of your brain power.  We moved recently and I didn’t do as good a job pitching things before I moved.  I got rid of several boxes of books and magazines that weren’t doing anything productive.  (At one point I was going to sell them, but that’s starting to fall through.)  My shoulders felt lighter after doing that, and it was one less thing I had gnawing at me and sapping my mental energy.

Selling stuff is a great way to raise cash to pay off bills and reduce debt.  Some of the prized possessions may (painfully) end up going, but try starting with the low-hanging fruit — stuff that doesn’t really do that much anymore — and enjoy the extra space and extra piece of mind along with the extra cash.

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Part of this excitement involved taking the first steps to adjust to a new mortgage payment.  My wife put down some numbers for what our expenses are currently, added them up, and came to the conclusion that things were going to be really, really tight as far as making ends meet.

This surprised me more than a little bit.  The difference in the mortgages between the two houses wasn’t gigantic:  only a few hundred dollars per month.  Were we that close all this time?  Did we really spend $1,000 per month on food for our family of three?  Are our monthly credit card charges reasonable, extravagant, or at a bare minimum?

If we had been tracking our expenses more carefully over the past year, I wouldn’t be doubting the numbers like this. I’m guilty as charged:  I still budget by The Force and we’ve managed to (yet again) squeak by for a few years doing it this way.  But I think I had a realization tonight:  We can’t afford to do this kind of thing anymore.

It’s more than just realizing that there’s fat in the budget that can be cut.  ($1,000 for food was high, by the way.)  It’s realizing that having a concrete saving and spending plan, and monitoring that plan, is critical.  Spending and saving without tracking things is just wandering, and after a while, you just don’t know where you stand.  Like I just found out.

Being unsure of where you stand financially isn’t pleasant. Take some steps to track your spending and saving, as I’ve started to do (again) with Quicken.  I’m going to try my currently-owned version (Quicken 2007 Home and Business) for a while to see if I can get the hang of it.  So far it seems easier than the last few times I’ve tried it.  I don’t think that’s Quicken’s fault.  I’m letting it do more of the work it was designed to do, like automatically updating transactions in accounts instead of me rolling up my sleeves and entering everything by hand.  I’ll go through to check them, but it’s probably a good compromise to have Quicken do the bulk of the work.

(This post contains affiliate links.)

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