Hiding in Plain Sight
In the past three years, Americans from all walks of life have seen their lives change in important ways. Unemployment, rampant foreclosures and financial reform are just a few of the ways the recession has altered lifestyles.
In an effort to stay sane and make ends meet, it’s no surprise that many consumers let some of the details fall through the cracks at a time when it’s important to pinch every penny. Free money is always a good thing, and it can come from anywhere.
As you complete your mid-year financial checkup, here are 11 places to look for money you may have never known you had.
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Your Old Job
In a volatile job market like the one currently hobbling the U.S. economy, it’s not unusual for workers to have several jobs during the course of the year. With so much turnover it can be hard for people to keep track of what they are due. The biggest culprit: old 401(k)s.
“If you leave a company they obviously don’t put more into your 401(k), but it’s still your money,” says Lynn Mayabb, a certified financial planner and senior managing adviser of financial advising firm BKD.
If you don’t know what happened to an old employer-sponsored retirement account, Mayabb advises that you contact the company’s HR department and get the documentation you need to roll over that 401(k) into a bank retirement account that you can manage yourself.
“People come in with an old 401(k) and just have no idea what to do with it,” she says. “It needs to be rolled over into an IRA, because the account may still be active but the investments are probably outdated. You can do better in a bank.”
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Speaking of 401(k)s, they are also one of the most reliable sources of free money that employees sometimes overlook. Most companies offer to match a certain amount of the contributions employees make from their paychecks to their company-sponsored retirement accounts.
Mayabb notes that while each company develops its own rules, most will match between 50 cents and a dollar for every dollar of the first 5%-6% of pay that an employee designates to contribute to his or her 401(k).
“The middle of the year is a good time to make sure you are contributing to that maximum match amount,” Mayabb says, “because there is still a lot of free money you can earn before the end of the year.”
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Your Property Taxes
Housing markets across the country have been fluctuating wildly in the past year, which means that property values need to be constantly reassessed to keep up with the changing times.
“If you’re living in a place with fluctuating housing prices,” says Ted Beck, president and CEO of the National Endowment for Financial Education, a nonprofit organization that supports programs teaching financial awareness, “you may be paying too much in property taxes.”
Beck has some firsthand experience, having successfully challenged his property value assessment twice for his home in Colorado, which lead to lower tax payments.
“You don’t have to blindly accept the amount they give you,” Beck says. Instead, he recommends doing a bit of homework on houses similar to yours that have sold recently and challenging the assessment. The best part? You don’t even need to pay for an official appraiser if you do the legwork yourself.
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Most taxpayers, having filed their 1040s by the April 15 deadline, have likely received their refunds and in many cases already spent them. But that doesn’t mean it can’t still help you save money.
“Most people think that a refund is just a nice bunch of money that the IRS gives them at the end of the year, but they need to remember that it’s their money,” says Mayabb. “The IRS doesn’t pay interest on it when they have it, so it would put more spendable money in their pocket right now or give them extra money to invest.”
To do that, Mayabb explains that workers can simply change the tax withholding status that determines how much your company sets aside from your paycheck in estimated taxes. It will mean less of a refund next April, but it puts more money in your pocket, which you can then invest in a way that works best for you.
“You’re basically giving an interest-free loan to the government,” says Beck. “Why would you do that?”
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It’s no big secret that the postal service has suffered in the Great Recession, but the fact that it still holds a monopoly on letter-sized deliveries means that it plays an important role in our lives. That also means that there is a ton of money hidden in the innards of the U.S. postal network.
Many long-term accounts and investments like certificates of deposit, life insurance policies and pensions or other retirement accounts mail out statements only once a year, says Mayabb, which means things often get lost when you change your address.
“Forwarding expires after six months, so you should go to the USPS and renew your change of address at least once,” she says. And you should be able to do it years after the fact just by providing the post office with a new forwarding address.
Mayabb recounts her own experience updating an address two years after she moved, which enabled a previously lost statement from an old pension account to reach her.
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Insurance plans are one of those things we tend to think about once and then continue making payments on in the background without realizing that as our lifestyle changes, our insurance needs to change as well.
“If you have a $250 deductible on your car insurance you are paying a lot in premiums for it,” says Beck. “Especially if you have an older car, that might not make sense.”
If your daily commute has changed or your car has gotten older, your auto insurance plan may not be right for you anymore, Beck says. He advises reassessing what your car insurance needs are and to get quotes, which are free and readily accessible.
Similarly, health insurance offers ways to find extra cash. Since health care reform established that children can remain on a parent’s policy until age 26, some parents may find that they no longer need the supplemental health insurance they took out for their older children under the old rules.
That being said, Beck cautions parents to look closely at the fine print of their policies, since some restrict coverage to children who physically live with their parents, for example.
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Your Current Job
As the economy picks up and employees begin looking for other job opportunities, many of them will leave cash on the table when they move. Some companies are better at supporting employees through the exit process than others, so everyone planning a move should know exactly what their company’s policies are.
“If you are planning to change jobs, go back and do some inventory,” advises Beck of the NEFE. “Find out if you can cash out on vacation time or sick time – companies have policies for this and you should at least know what they are.”
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Many beginning investors follow what Craig Lemoine, CFP and assistant professor of financial planning at The American College, calls a “set it and forget it” investment strategy: In the interest of a low-maintenance investing strategy, they put money away every month in a mutual fund or money market account and just let it grow on its own.
“The problem with unmanaged accounts is that you are subject to much more volatility,” he says. “When market conditions do well, you do well, but when you have a recession or interest rates rise then your account will be subject to greater losses.”
He points to sources of uncertainty like the housing market, ongoing debt negotiations in Washington and financial reforms that make it more important than ever to have a diversified portfolio.
“There has been some recovery from the recession and bank accounts are up,” he says, “so it’s a good time to look at the whole picture and make sure your money is where it should be.”
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From credit card rewards to frequent flier programs, most of us are part of some sort of loyalty program that earns points based on the money we spend. While those points are equivalent to some amount of money, they can disappear and go unused if they aren’t managed properly, says Beck.
The key to properly managing those accounts is to keep them active so the points don’t expire. Beck gives several examples of how to keep frequent flier miles active, even if you have no plans to book a trip anytime soon.
“Often an airline has partners, and if you use services like a hotel or car rentals the airline has a partnership with, the money you spend could keep your frequent flier account active,” Beck says. “It’s easier than it sounds.”
He recommends simply looking up who the airline partners with – other travel services, retailers, even charities – and spend some money there, using your membership number. You will earn more points and keep your account active until you are ready to book that flight.
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A lot has changed in the banking industry since the Dodd-Frank financial reform bill came into force, and that means new terms for many bank and credit card accounts that may be costing you money you don’t need to pay.
“Thanks to the CARD Act, credit card companies can’t charge the same rates they used to,” notes Lemoine, the teacher, “so in many cases they just raised them. It might be a good time to look for a new card with a better or a promotional rate to save on those fees.”
Checking accounts have experienced a similar trend, he says.
“The terms of your account may have changed and you may have agreed to them without thinking about them some time that you went to your account online,” Lemoine said. “Go back and check and make sure the account is right for you, especially if it has a minimum balance requirement to get lower fees.”
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Older generations grew up in very different times, and therefore learned different money habits than those of today. This means that your parents might have money squirreled away for you that they may even have forgotten about.
“Parents often take out a ‘whole life policy’ for their kids with the idea that eventually they can use the cash value,” says Mayabb, the financial planner. “The policy will have a cash value of ‘X’ and you can either keep the policy and pay the premiums yourself, or cash it out and invest the money otherwise, or even borrow against the policy as an asset.”
All it takes is a phone call to the folks, and you could find yourself with an unexpected windfall.
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More Ways to Save
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