Sweat the Small Things
As much as I sometimes hate to admit it, much of financial planning boils down to the simple things, such as just being organized. Sure, it’s also essential to understand more complex financial planning topics such as Modern Portfolio Theory and Monte Carlo Analysis, but don’t underestimate the importance that everyday tasks such as staying on top of paperwork and deadlines can have on your bottom line.
This fact really hit home the other day when someone I know almost “lost” close to $2,500 of her personal money when she barely made the deadline to submit a claim for her dependent FSA (flexible spending account). Like a health care FSA, a dependent FSA allows participants to set aside before-tax dollars from each paycheck to be used for childcare expenses. I have always encouraged clients to take advantage of these plans if possible because the tax savings are well worth it.
Except when they are not. And they are not when you forget to submit your claims before the plan’s deadline! When this happens, as many of you know, you forfeit the entire amount that has not been claimed. Typically deadlines for these plans occur at year-end, though sometimes plans offer an extension until the end of the following quarter (for this year 12/31/12 or 3/31/13 depending upon the plan).
In the example above, however, the person had recently resigned from her job and, in the busyness of the transition, had forgotten to check if the deadline for the plan was different for terminated employees, which of course it was. She had only 30 days from the day of termination, not year-end, to submit any claims. Fortunately, on day 29, she inadvertently stumbled upon the plan brochure, saw the different deadline, and quickly mailed in her receipts before it was too late.
I’ll be the first to admit that I am not one of those naturally uber-organized Martha Stewart types. I don’t have color-coordinated files, electronic back-ups of all of our family photos in chronological order, or pre-printed holiday labels for Christmas cards. Thank god! But some level of financial organization is essential so that deadlines like the ones above do not fall through the cracks.
A good starting point is to simply schedule some time over the next week to program alerts on your calendar, such as when you plan to submit your FSA claims, when estimated tax payments are due or an end-of-quarter appointment with yourself to review your budget or investments. And, to avoid what happened to the woman above, make sure that you re-evaluate these dates any time you are experiencing a transition, such as a job change, a change in marital status, or other major event.
So as tempting it is to launch into a soliloquy on Modern Portfolio Theory or Monte Carlo Analysis (or not!), I’m just reminded today to stay on top of the small things, because even they can make a huge difference in the long-run.
This fact really hit home the other day when someone I know almost “lost” close to $2,500 of her personal money when she barely made the deadline to submit a claim for her dependent FSA (flexible spending account). Like a health care FSA, a dependent FSA allows participants to set aside before-tax dollars from each paycheck to be used for childcare expenses. I have always encouraged clients to take advantage of these plans if possible because the tax savings are well worth it.
Except when they are not. And they are not when you forget to submit your claims before the plan’s deadline! When this happens, as many of you know, you forfeit the entire amount that has not been claimed. Typically deadlines for these plans occur at year-end, though sometimes plans offer an extension until the end of the following quarter (for this year 12/31/12 or 3/31/13 depending upon the plan).
In the example above, however, the person had recently resigned from her job and, in the busyness of the transition, had forgotten to check if the deadline for the plan was different for terminated employees, which of course it was. She had only 30 days from the day of termination, not year-end, to submit any claims. Fortunately, on day 29, she inadvertently stumbled upon the plan brochure, saw the different deadline, and quickly mailed in her receipts before it was too late.
I’ll be the first to admit that I am not one of those naturally uber-organized Martha Stewart types. I don’t have color-coordinated files, electronic back-ups of all of our family photos in chronological order, or pre-printed holiday labels for Christmas cards. Thank god! But some level of financial organization is essential so that deadlines like the ones above do not fall through the cracks.
A good starting point is to simply schedule some time over the next week to program alerts on your calendar, such as when you plan to submit your FSA claims, when estimated tax payments are due or an end-of-quarter appointment with yourself to review your budget or investments. And, to avoid what happened to the woman above, make sure that you re-evaluate these dates any time you are experiencing a transition, such as a job change, a change in marital status, or other major event.
So as tempting it is to launch into a soliloquy on Modern Portfolio Theory or Monte Carlo Analysis (or not!), I’m just reminded today to stay on top of the small things, because even they can make a huge difference in the long-run.