Financial Resolutions & Habits: Part 3

We’re still digging out of our snow here in Raleigh, and in a way I imagine many parents and kids will feel Monday is a bit like the first day of school all over again. When everything shuts down so completely it’s hard not to feel like it’s a reset of the new semester and the new year.

So it’s apropos, I think, that we are concluding our series on Financial Resolutions & Habits, because there’s no better time to consider some of these recommendations than at a reset.

Today I’m going to cover three actionable topics that I believe will lead to immediate and lasting fruit: Document PurgeAutomation, and Talking to Your Kids About Money.

  1. Document Purge. One of the common questions we get as financial planners revolves around organization of our finances: “Just how long should I keep these documents around?” It’s a great question, and we could devote a whole brief to the importance of financial organization, but I’ll take a stab at answering it in the context of three important types of documents:
    1. Tax Returns. There is a 3-year and 6-year statute of limitations governing the amount of time the IRS has to reach into past tax years to audit your return, depending on their reasoning for the audit (and assuming you haven’t been fraudulent in your filing, in which case there is no statute of limitations). All that to say, to be safe, saving the last 7 years’ worth of Tax Returns (and the key supporting documentation) is probably wise.
    2. Financial Statements. Whether you get paper statements or electronic statements, you have probably wondered at some point how long you need to keep them, whether you need to keep any of the quarterly ones or just the annual ones, etc. Unfortunately this one isn’t as tidy as the tax return situation because it depends on what’s gone on in the accounts. That being said, I’d recommend keeping quarterly statements only long enough to check against the annual statement, and I’d keep the annual statements indefinitely. We archive copies of your statements indefinitely and Schwab makes them available online for the past 10 years, should you need a copy.
    3. Bills. These pesky things tend to stick around far longer than they need to. Once you’ve confirmed your payment of the bill has cleared, you should shred them. The only exception to this would be receipts from home improvements or other large purchases. These should be kept until you sell the asset in question—in the case of the home, to prove your basis, and in the case of other big purchases, for insurance purposes.
  2. AutomateOne of the easiest and most valuable things you can do in your financial life is to automate every bit of it that you can. Doing so frees up time for you, and it also solidifies great habits without you having to spend your will power.
    1. Emergency Fund. If you don’t have an emergency fund, or you are wanting to increase the size of yours, automate the saving each month. It’s also a good idea to keep this cash sitting in a high-earning savings account (Ally Bank is a great option, and there are others).
    2. Bills and Other Recurring Cash Flows. Your credit card, your mortgage, all your utilities, your phone bill, any recurring giving—all of these payments can be automated.
    3. 401k. This one is kind of automatic already, but make sure you’re contributing up to the employer match at least, and if you’re maxing it out, remember to increase your contributions this year to account for the extra $500 you’re able to save there.
    4. Other Investment Accounts. If you’re eligible to contribute to Roth or traditional IRAs, or you’re contributing to a taxable brokerage account, or to a kid’s 529 account, all of this can and should be automated.
    5. Increase Automated Saving. Over time, as your income grows, your savings should reflect that. Otherwise your lifestyle will quickly outpace your saving over time, leading to the difficult reality of seeing a significant lifestyle decrease at retirement.
  3. Talk to Your Kids About MoneyTo put it simply, we don’t talk with our kids enough about money. There are a whole host of reasons for this, but perhaps the most important one is this: we’re afraid that by talking about it, we are somehow setting them up to be consumed by it. But a moment’s reflection on that reasoning reveals its error. Money would have to be somehow inherently dirty or negative for this to be the case, and a healthy understanding of money reveals that’s not the case at all. I’d go so far as to say that by not talking about money with our kids we’re engaging in a sort of socially-acceptable form of neglect, because we’re setting up a bunch of 17- and 18-year olds to make their first real financial decision when likely north of $100,000 is on the line in the form of student debt or your tuition dollars. So start early, and communicate often:
    1. Think about employing an allowance at an early age so that you can help kids learn how to make financial decisions with small dollar amounts. In his book The Opposite of Spoiled, Ron Lieber makes the case for not tying these amounts to regular chores (which everyone has to do just because they’re part of the family), but there are a number of strategies you could choose.
    2. Talk to them about the value of work. Encourage them to get jobs, whether formal (I.e. W-2) or informal (I.e. childcare or yardwork).
    3. Talk to them about generosity. Teach your children (through conversation and through your own action) about the importance of giving to causes they care about. This is a lesson that will stay with them their whole lives.

That wraps it up for this post and this series! As always, please let us know if you’d like to talk about anything you’ve read here. Hopefully as you start to put some of these recommendations into practice you’ll notice a real sense of accomplishment and healthfulness that is sustainable throughout the year and for years to come.


Jared Korver
[email protected]

A product of small-town North Carolina (Carthage, to be exact), I’m proudly married to my best friend and co-adventurer, Amy. Together, we have two sons–Miles and Charlie–and could more or less start a library from our home. I love being outside, can’t read enough, am in the habit of writing haikus, and find food and coffee to be among life’s greatest treasures.