My latest article on U.S. News & World Report recommends tips to simplify your finances in retirement. Retirement isn’t the only time to simplify.
Anytime is a good time to simplify.
But I’m a bad role model for simplifying finances because I’m on the far side of the spectrum with multiple personal investment accounts and bank accounts. Plus extra accounts for my rental property and side business.
Recent events remind me that my financial life has become more complicated than I want it to be.
I completed my taxes last week and that always puts me in a simplification mood. Then a good friend faced a very difficult medical situation that required him to get his arrangements in order just in case he didn’t make it. He’s OK now, but scary stuff.
We’re also in the middle of setting up our estate planning documents so this stuff is front and center.
Like most couples, one of us handles the finances (guess which one?). If something terrible were to happen to me, the family would be fine with our current assets and life insurance policies.
However, sorting through all the financial accounts would be a major headache for my wife that would last for years.
So I’m dedicating this year to simplifying our finances. The end result will be a one-page doomsday printed sheet of paper for Mrs. RBD telling her where everything is, how to get it, and what to do with it.
The #1 Reason To Simplify Your Finances
The #1 reason that’s driving me to simplify this year is the thought of me dying and leaving my family with overly complicated finances. My quest to create multiple income streams has made it all difficult for Mrs. RBD to follow.
Breaking it down to one sheet of paper complete with instructions seems like a reasonable goal for simplification.
Up until now, my doomsday instructions to Mrs. RBD was to log into our Personal Capital account to see where all the money is and go from there.
All of our account information for everything in our names is available in one view (that’s why I love Personal Capital and recommend it).
She could use it see it everything we own, but that’s not a plan. Mrs. RBD deserves a better system than here’s everything, go figure it out.
Estate Planning Priorities
We’ve procrastinated setting up the basics of our wills and estate plan. As a husband, Dad, and money nerd, I’m ashamed this isn’t complete yet. We met with an attorney a while back but didn’t follow through with the paperwork.
The first step was to write down all the accounts and make sure they are joint and/or have each other listed as the beneficiaries. We never took that first step. This month, we are.
One of the many awesome benefits of my new job is a group legal policy. It’s like an insurance policy for legal stuff.
The policy costs me about $7 per paycheck. Estate planning services will be 100% covered by the legal plan. The normal costs for comprehensive estate services (wills, trust, directives etc.) is well north of $1,000 in our area.
We did procure life insurance policies in the first year of our marriage before having kids. This involved several quotes, questions, and blood work.
With the cheapest rates going to the healthiest candidates, I exercised non-stop for about a month and crushed my blood scores to get the cheapest available rates!
Some life insurances companies like Haven Life don’t require a medical exam for certain candidates and quotes are fast and free. If you’re married, and most definitely if you have kids, a basic term life insurance is a must-have.
The rule of thumb is to get 8-10 times your annual salary in coverage.
My new employer provides some additional coverage and I can purchase even more life insurance for a good price without another medical exam. I jumped on that deal for an additional 3 times my salary in coverage.
So my wife and kids are protected with cash if something awful happens to me. Our current assets will be there too, but they are scattered around and not-so-straightforward, especially considering withdrawal strategies and tax implications of asset sales.
All of Our Accounts
Alright, so I’m about to slap down all of the accounts we use for banking, equity investing, and alternative investments. I try to keep things under one roof (i.e. one login or company) when I can but the number of accounts has grown over the years.
For banking, I do a decent job of staying consolidated under primary companies.
But in the investing space, I can do better. Transferring stocks can be a pain. But if the task of transferring shares sucks for me, it would suck ten times worse for my wife if I’m not here to explain it.
OK, here’s the goods. Seeing these in one list makes me want to double down on simplification (go horizontal to view on a mobile device).
|Bank Accounts||Alternative Investments||Brokerages|
-Condo Rental Checking
Chase (rewards cards)
Amex SPG Rewards
-Mrs. RBD IRA
-Mrs. RBD Roth
Vanguard – IRA (old 401k)
Motif Investing (IPOs)
The plan to simplify is to consolidate accounts or funds/shares under existing primary accounts and eliminate less frequently used accounts.
What I’m Doing in 2018 to Simplify our Finances
Back in 2014, I embarked on a similar project, combining and simplifying our finances after Mrs. RBD’s stopped working. We did make some progress, but since 2015 things have turned more complicated.
I personally don’t think it’s that complicated. However, I’m now viewing this from the perspective of Mrs. RBD who is not into personal finance or investing.
So how can I simplify things enough for her understand while still continue to invest and build multiple passive income streams on various platforms? My plan of attack is to transfer the obvious accounts first, then make tougher decisions later on.
Here’s the immediate plan.
1. Transfer DRIP Stocks Out of Computershare to TD Ameritrade
Computershare is a stock transfer agent, not an online broker. DRIP (dividend reinvestment plans) investing via transfer agents is how I started investing in 1995. It’s no longer practical since trading fees are now cheap and you can accomplish a DRIP-like strategy at most brokerages now.
Each stock owned at Computershare is a separate account and requires a separate 1099-DIV at tax time. Transferring all four stocks into TD Ameritrade will make collecting and reinvesting dividends easier.
Way back in 2014, I transferred my Verizon DRIP shares out of Computershare into my TD Ameritrade account. I followed that with Emerson Electric (EMR), Clorox (CLX), Proctor & Gamble (PG), and CSX (out of Broadridge).
But I never touched Chevron (CVX) and Coca-Cola (KO) because I have 20 + years of cost basis reporting to transfer as well. This will be a pain for me, but way worse if Mrs. RBD ever had to deal DRIP cost basis reporting.
My Bank of America (BAC) and Aqua America (WTR) shares are also at Computershare.
2. Decrease Real Estate Crowdfunding Platform Participation
Last year, I opened three accounts with the top real estate crowdfunding platforms. I love this investment class, and all three platforms are great. But two of them are a better fit for me.
Fundrise is still the easiest platform to invest on because any U.S.-based investor can start with just $500. For that much, you are instantly diversified across nearly 40 high-quality residential and commercial properties. Tax time is straightforward and the returns are excellent (7%-11%). Plus there’s liquidity. So I’m sticking with Fundrise. Read my full Fundrise review here.
PeerStreet has emerged as perhaps my favorite platform for its ease of use and transparency. For a $1,000 minimum investment, you can invest in individual debt deals automatically based on your preferences. Deals are shorter-term (3-month to 2-years) so your money isn’t tied up for long. Deals are backed by the property making your investments less risky.
RealtyShares was the first real estate crowdfunding platform I invested on and two of my deals are still live. I’m happy with the returns and the platform, but in the name of simplification, I’m not making any new investments. Deal minimums are high for me at $5,000, and the lower minimum deals are hard to get into. There are longer investment horizons and less liquidity.
Though I still think the platform is unique and well-suited for higher net worth investors, I’m going to let my current investments mature and cash out. Read my RealtyShares review here.
3. Cash Out of Peer to Peer Lending
This is a tough one. Since last summer, I’ve been withdrawing cash from my LendingClub account and using the proceeds for other purposes. I’m approaching five years of investing on the platform and think it’s a good way to generate passive income.
However, a few things have turned me off.
First of all, the founder/CEO was ousted under duress for complicated reasons. Since then, there’s been a lack of product innovation. Returns have significantly decreased while the economy has strengthened.
Taxes become more complicated with LendingClub investments. The interest gained from lending to borrowers is easy to report. But deducting losses is arduous. On top of all that, the money is illiquid unless you sell at a bargain price on a third-party site.
But it’s a place I can simplify by winding down my investments. However, it will take another four years for all the notes to mature. What to do with this asset class will be complicated to explain on a one-page instruction sheet.
4. Cut Back on Virginia 529 Fund Selections
We’ve invested $300 dollars per month per kid into the Virginia 529 plan since each was born. That’s $900 per month total. To diversify, I’ve always invested $100 in each of three different funds for each kid. Because of the inefficient way the state plan is configured, each fund is considered a separate account.
That means nine separate $100 withdrawals from my bank account each month (I complain more about it here).
From now on, instead of investing in so many different funds, I’m putting all the new money into the total market index fund available. That will require only three withdrawals all into the same fund. To diversify, I’m going to reallocate the existing balances among other funds.
5. Other Possibilities
Those four action items above are on the list for 2018. I’m committed to them. The set of ideas are possibilities for this year and in the future. These are tougher decisions, but I may get more serious and move forward with them.
Sell the condo
Last year, I seriously explored selling my condo rental. This is the most significant simplification action I can take. For now, my tenants and I are both happy and we’ll continue our relationship until they vacate.
Removing the property from my life would free up $100k+ of equity and eliminate two accounts and a mortgage. Selling would simplify my taxes and end my landlording responsibilities.
Close Motif Investing Account
I continue to keep the Motif Investing account open for IPO investing opportunities. Since I run another website about IPO investing, the account keeps me abreast of investment opportunities. I’ve also profited nicely from IPOs over the years and expect to keep investing in selected offerings.
Transfer EVERYTHING to One Brokerage
After the first four simplification moves, I’ll still have four separate brokerage accounts. Seems like a lot, but I use them all. If I want to get very serious about simplification, I should put it all under one roof. That’s a big move and I’m not prepared to do it yet.
As I mentioned last week, I transferred my old crappy 401(k) into a traditional IRA at Vanguard, even though most of my accounts are with Fidelity. Why did I intentionally complicate things by doing this?
Well, I was expecting to work for a different employer who uses Vanguard as their 401(k) administrator. Long story, but I ended up finding a better gig. Vanguard is highly respected and very low-cost so and I wanted to try it. The balance is a sizable amount, so it will be at the top of the list when I pass the one-pager to Mrs. RBD. My initial impression is Vanguard is a bit clunky and outdated. But the funds are top notch.
I could also transfer my TD Ameritrade and M1 Finance holdings to Fidelity. I’ve had a TD Ameritrade account for about two decades. I’m not eager to leave as I’ve been mostly happy. But I could easily (I assume) transfer all holdings to a taxable account at Fidelity, bringing all my primary dividend investing and retirement accounts under that roof.
Trading fees are cheaper. But I fear the cost basis would not transfer accurately giving me a headache. I’d need assurances the transfer would go smoothly.
My M1 Finance is brand new and I intend to use it as my dollar cost averaging account to slowly accumulate shares and reinvest dividends. It’s 100% free to buy and sell. I’m rather enthusiastic about the platform and want to continue to grow assets there as well.
As a money nerd and blogger trying to keep things interesting, I enjoy investing on multiple account platforms. Habits don’t fade quickly. I’ll do my best to simplify, but investing is my hobby, and I like different options.
Even though I’m simplifying this year, I still may try some new investment platforms. I love investing and we’re in a golden age of fintech innovation. Platforms such as StreetShares and Wunder Capital are both of interest to me. By investing in new platforms myself, I can also help readers determine if they are right for them.
Closing some old accounts could make room for new accounts. But I’m going be more stringent in my selection going forward.
The changes laid out above aren’t huge, but the majority of our assets will be with fewer institutions. Doing this should make things more straightforward to populate a one-page doomsday letter for Mrs. RBD. The positive side effects when you simplify your finances are fewer accounts to track, easier taxes, and more free time.
Long LC, EMR, BAC, CVX, CSX, KO, PG, CLX, VZ, WTR
Photo by Lum3n.com via Pexels
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