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Archive for Wednesday, January 24, 2007

From the stone age to the digital age

January 24, 2007

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Your desk is littered with bills, fund prospectuses, tax forms and credit-card offers, and you don't know where to start. How can you get it all done without spending every spare moment holed up in your den?

Here are some easy-as-pie steps you can take to streamline your finances:

¢ Do your taxes digitally. If you're still kicking up eraser dust when you fill out your federal-income-tax form, it's time to join the digital age. You'll probably discover that you save hours of work. The Internal Revenue Service estimates the average household will spend 14 to 16 hours completing Form 1040 and related forms and schedules, not including Schedule A or D. By contrast, Intuit claims the users of its best-selling TurboTax software will be able to do the job in about four hours.

¢ Pay bills online. The process is speedy, cuts down on paper clutter in your home, and spares you from scrounging for stamps. All major banks and credit unions now let you pay bills online, and an increasing number allow you to receive your bills at their Web sites. Worried about online identity theft? Don't be. Paying bills electronically is actually safer than sending checks through the mail.

¢ Put your savings on autopilot. Have your employer deposit your paycheck directly into your checking account and then instruct the fund company of your choosing to move a specified amount from checking into a money-market or other fund once a month. Direct deposit might even save you money because many banks waive fees if you use it.

¢ Consolidate investments, automate tracking. Keeping track of your stock and mutual-fund shares and their prices can be tedious and time-consuming - especially if they're managed by multiple companies. Generally, the more you keep at a single company, the less you'll pay in custodial fees and other expenses. As for following share performance, software such as the free QuoteTracker (www.quotetracker.com) can automatically update your portfolio using online data sources. You can also import data from QuoteTracker into spreadsheet programs such as Microsoft's Excel.

¢ Dump your extra credit cards. Why carry a dozen when a few will do? Get rid of cards you never use and merchant cards you applied for solely to get a discount. Keep your oldest card because the longer your credit history, the higher your credit score. If you carry a balance, keep a card with a low fixed interest rate. Card issuers can raise a fixed-rate card's interest rate, but they must give you 15 days' notice. By contrast, an issuer can change the interest rate on a variable rate card regularly and without advance warning. If you're not satisfied with the cards you have and want to see if there are better deals, try the search engines at www.bankrate.com, www.cardratings.com and www.lowcards.com.

¢ Toss that needless paper. While you're ridding yourself of excess plastic, you can also lose a lot of those receipts, canceled checks and bank statements you've been hoarding. Retain records that support items on your federal tax return for as long as the IRS can hit you up for additional tax. (That's typically up to three years from the date you file your return, but the clock ticks for six years if the agency suspects you underreported your income by more than 25 percent.) Save ATM, credit- and debit-card receipts for big-ticket items in case you have to return them. Get rid of receipts for other stuff after the transaction appears on your statement.

Even if these and other changes make your financial life the very picture of simplicity, it could all blow up if you don't take one additional step: Hire a lawyer to draft a durable power of attorney. A DPA will permit someone you trust to safeguard your assets and pay your bills if you get sick and can't manage your own money.

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