Why you can stop balancing your checkbook now(Read article summary)
Technology has obliterated or automated a lot of the money tasks that were once mandatory for people who wanted to be responsible with their finances. Here are several financial chores you can and should do differently now.
Think about how difficult it was to clean a house 100 years ago, or make a phone call, or travel across the country.
Tasks that were routine then — like, say, beating a rug to clean it — have all but disappeared.
Likewise, technology has obliterated or automated a lot of the money tasks that were once mandatory for people who wanted to be responsible with their finances. If you do any of the following chores, you can and should do them a lot differently now:
Balance your checkbook
Once upon a time, you got a paper statement each month from your bank. You compared the transactions on that statement with what you’d recorded in your check register, adding in any deposits and subtracting any checks or other transactions that hadn’t posted by the time the statement was printed. Then you spent the next hour trying to figure out why the totals didn’t match. (Here’s how to do it right.)
At least some of us did.
These days, though, we write far fewer checks, most transactions post pretty quickly and bank errors are rare. We still need to monitor our accounts to spot bogus transactions, keep track of our balances and avoid overdrafts, but the monthly ritual of trying to reconcile a statement to a register is pretty much obsolete. (If you still do write a lot of checks, please switch to more secure payment methods. The information on each check gives the bad guys every bit of information they need to raid your account.)
Rebalance your investments
The right asset allocation — how you divvy up your funds among various classes of stocks, bonds and cash — can help you achieve your investment goals with less risk.
In the olden days, we had to decide how much to put where and then regularly rebalance our portfolios back to those target allocations. If stocks did particularly well, for example, we’d have to sell some of those and buy some bonds to get our allocations back on track. If we failed to rebalance, we’d get our clocks cleaned when inevitable stock downturns cratered our portfolios.
Now we can outsource this burdensome task by buying target-date retirement funds, which have asset allocation and rebalancing services baked in. Or we can invest our money with an automated financial advisor that uses computer algorithms to allocate and rebalance our funds. Betterment, Wealthfront, Charles Schwab Intelligent Portfolios and Vanguard Personal Advisor Services are among the investment managers that use technology to automate investing.
The IRS accepts electronic documents, and so does nearly everyone else.
You can reduce the paperwork that comes into your home by opting for electronic statements and receipts whenever possible. Services such as FileThis can automatically download electronic statements into your computer, relieving you of this chore each month. Virtually any document you get in paper form can be scanned; paper receipts needed for tax purposes should be, since many receipts fade over time otherwise and become unreadable. Back up your computer regularly to a secure online service or to a disk or drive you can store off site.
The only documents you absolutely need to keep in paper form are those that are a hassle to replace, such as birth, marriage and death certificates.
Visit a bank
Get this: People used to stand in lines to give banks their money. I kid you not.
Bringing your paycheck to the bank was a regular ritual for most workers. Today, direct deposit is the safer, automated way to go, while other checks can be deposited with your bank’s smartphone app. Most other chores that used to be done in person, such as applying for a loan, can be done faster and more easily online.
Create a budget
It’s still important to have a plan for where your future money will go and to compare your expenditures against that plan to avoid overspending.
But you no longer have to start from scratch, sifting through a pile of statements and receipts to craft a budget. Account aggregation and budgeting sites such as Mint can analyze months’ worth of transactions to help you create a spending plan, monitor your progress and warn you when you’re about to overspend in a given category.
Track your mileage
Back in the day you needed to keep a driving log, usually handwritten, to track your mileage if you wanted to be reimbursed or to deduct the expense in your business. You had to include dates and miles driven plus where you went and the business purpose of the trip. It was a lot of work and it was easy to forget trips, which meant leaving money on the table.
Fortunately, most of the hassle has been automated away now with mileage-tracking apps such as MileIQ that record when and where you drove. You swipe right to classify a trip as business or left to deem it personal. The app lets you assign a specific purpose, such as a commute between offices, customer visit, meeting, travel, etc.
Pay for a credit score or report
Knowing what lenders are saying about you is important, since the information in your credit reports is used to set insurance premiums and utility deposits in addition to determining the rates and terms you get on loans. Credit reports are also used by landlords and many employers.
Not that long ago, you typically had to pay for copies of your credit reports and scores. It was a big step forward when the federally authorized website AnnualCreditReport.com went online more than a decade ago, but you still could access your free credit reports only once a year and you had to pay for scores.
Now you can get both pretty much on demand.
NerdWallet and other personal finance sites offer free credit scores and reports updated monthly or even weekly. The credit reports tend to come from a single credit bureau, and typically the scores are VantageScores, which share a 300-to-850 scale with FICO scores and weigh the information in your credit reports similarly. So while you won’t get a comprehensive view of your credit picture, you’ll get enough information to know generally where you stand with lenders, and you can track your progress as you work to improve and maintain your scores.
Many credit card issuers, including American Express, Bank of America and Barclaycard US, offer free FICO scores to their cardholders, while Discover offers free FICO credit scores to anyone. Capital One offers free VantageScores to anyone.
You may still want to buy your scores from MyFico.com to get a more precise idea of the rates and terms you’re likely to receive on a major loan such as a mortgage or an auto loan, since FICOs are the scores used in most lending decisions. But you don’t need to pay just to keep an eye on your credit.
This article was written by NerdWallet and was originally published by The Associated Press.