Stuck at Home? It's Time to Take a Look at Your Finances

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Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar.com. During the current COVID-19 crisis, some people are finding themselves at home with a little extra time on their hands. Joining me today to talk about some financial tasks you might consider knocking off your list while you're at home is Christine Benz. Christine is our director of personal finance at Morningstar.

Christine, thank you for joining me today.

Christine Benz: Susan, it's great to be here.

Dziubinski: We'll first start by saying, of course there are plenty of people right now who are busier than ever, so they don't necessarily have the time on their hands that we're suggesting. But if you are at home and you do, you're saving yourself a commute or for whatever reason you find you have some spare time, one financial task you suggest knocking off that list is doing your taxes. Now we have until July, so why do you think that's something that should be on the top of our to-do list?

Benz: Obviously if you're getting money back, you don't want to delay filing. Get that return in as soon as possible to expedite your return. If you are owing, I still think it's worth figuring out what you owe. You'll ultimately wait until July to file your return because you don't want to have to pay any sooner than you need to, but take your time to figure out what you owe. And also, if you do owe maybe more than you expected, it'll give you some time to think about where you'll go for funds to pay your taxes and potentially budget for them in advance.

Dziubinski: Now you also think, Christine, that now is a good time for us to go through our financial paperwork and get things organized.

Benz: Right, I've been banging this drum for a while, but in my experience people hang on to way too many paper documents. It gives them filing headaches, and it also exposes them to more identity theft issues than would be the case if they were receiving electronic document delivery. So, if your financial providers have been badgering you about going paperless, it's time to take them up on it. Check those boxes. You may even actually be paying to receive physical paper documents. So you could save a little bit of cash every month. And then once you've done that, go the extra step of culling the paperwork that you have hung on to. Go through your files. Chances are you're saving way more than you need to. I often see people save shareholder literature, like annual reports and prospectuses; you can get that stuff out of your filing cabinet and create a system that will be more skinnied down. And of course, you want to save any very difficult to replace documents in a safety deposit box--outside of your house, ideally.

Dziubinski: Now related to do here, Christine would be creating some of these documents, these larger overarching documents that we should have that address our investment and financial plans. What would those be?

Benz: Absolutely. A few of the ones that I would call out would be what I call a master directory. Also, an investment policy statement and a retirement policy statement. So starting with the master directory, that's simply a guide to the investments that you own, where you own them, maybe the approximate account value, account number. And you want to password protect this document or encrypt it and share it with someone who could need access to your information in a pinch. So it's a way of inventorying all of your assets and having it in a streamlined document that someone could take a look at if they needed to, if there were some sort of a financial emergency. An investment policy statement is another document that I think every household, where you've got investors, should have. And the basic idea is that it's a blueprint for your investment plan.

So it lays out your asset allocation plan, it lays out your approach to reviewing your investments on an ongoing basis. So it documents how you will choose and monitor your investments on an ongoing basis. And finally, a retirement policy statement is something that I recommend that all retired households have. And the basic idea there is that it lays out your system for generating income in retirement. It lays out your system for cash flows from your portfolio, what your withdrawal rate will be, how you will generate cash from your portfolio. You might include some details about your approach to social security, and any other nonportfolio income sources as well. So those are really the big three documents that I think every household should have to document their financial and investment plans.

Dziubinski: One thing that often falls to the bottom of our to-do lists is creating or updating our estate plans. What should we be thinking about there?

Benz: This is one that seems to get pushed down to the bottom of everyone's list. And the fact is it's not any fun to ponder our own mortality, but it has been top of mind recently as we've been monitoring the current crisis. If you don't have an estate plan, you can either use some sort of an online resource--and there've been many that have popped up in recent years--or turn to an attorney. And I believe that many of them are now doing video conferencing. So you shouldn't use the current shelter-in-place rules as an excuse to put this off because chances are you'll be able to find someone who will work with you.

And so, you're really looking to get the basics hammered out. You're looking to have a will. If you have minor children, you'd certainly want to have guardians specified for them. We all need to have powers of attorney, people who will make financial and healthcare decisions on our behalf if we're unable to make them. A living will is another essential document to have. So check in with an attorney or, if you have a very simple estate plan, you may use an online resource. But this is something to focus on, especially if you find yourself with a little bit of extra time. Another thing that I would add under that estate planning heading would be checking up on your beneficiary designations. Because many of our assets do pass through beneficiary designations, and those actually supersede what you may lay out in your will. So definitely attend to those beneficiary designations. If you had an estate plan that made sense for you 10 years ago, there may have been some changes in your life. Check up on it to make sure that it still syncs up with your current situation.

Dziubinski: Well, Christine, looks like you have a lot of smart and important things for us to do to fill our time that we have if we're at home these days, other than streaming videos and watching movies.

Benz: Right.

Dziubinski: Thank you for your time, Christine. It's always a pleasure to talk with you.

Benz: Thank you so much, Susan.

Dziubinski: I'm Susan Dziubinski for Morningstar. Thank you for tuning in.