Personal Finance March 8, 2015

    Sometimes being smart about your money doesn't require you to be hands on. In fact, creating a financial checklist to maximize your savings might even allow you to be more hands off, freeing up time to focus on the things that matter most to you.

    Simplify your financial records

    1. Consolidate financial accounts

    The most precious resource in the world is your time, and a smart way to retrieve some spare minutes (and hours) is to consolidate and streamline accounts wherever possible. Take 401(k) accounts, for example—more than a third of affluent Americans have at least one left behind with previous employers. By combining your assets into fewer accounts, you may be able to reduce fees and money management headaches. Best of all, it will be easier to take a holistic view of your financial position. Prior to combining assets in your accounts, it is important that you understand potential benefits as well as limitations of all your available options including, but not limited to, investment expenses, investment selection and account fees.

    2. Go green by going paperless

    Even in the digital age, we are still swimming in paper. Cut the clutter by going paperless—not only will you hopefully be better organized, you'll reduce your carbon footprint, too. Most banks—and, of course, Schwab Intelligent Portfolios™—offer easy-to-use dashboards and real-time account information. New tools let you retrieve statements online from all of your accounts without logging on to different websites for each one. Plus, you won't run the risk of misplacing your paper documents.

    3. Automate bill paying and saving

    You need never pay a late fee again if you pay your monthly bills automatically. Do the same thing with savings by sweeping money into your investment account each month, either through a direct deposit from your paycheck, or by asking your financial institution to move it from checking to an IRA or brokerage account where it can be automatically invested. Investing a fixed amount each month, or "dollar-cost averaging," means that, in principle, fewer shares will be purchased when prices are high and more will be bought when prices are low. Over time, dollar cost averaging can be a relatively painless way to pursue your long-term financial goals, because you'll be less likely to go all-in when the markets are overextended or to pull back when they drop. In addition, regularly scheduled investing is a healthy habit that can lead to more savings over time—because you can't spend it if you save it first.

    4. Check in with your partner

    You talk to your partner regularly about the kids, the house and the car—you should try to make regular financial conversations a priority, too. And of course, whenever you have big changes in your life, like marriage or a new baby, don't forget to make the necessary adjustments, including updating your Schwab Intelligent Portfolios profile. This will help ensure that your asset allocation is in line with your new circumstances.

    Be smarter about taxes

    5. Make strategic deductions

    Many taxpayers automatically take the standard deduction, but your itemized deductions might be worth more than the standard deduction. This tactic can be especially advantageous if your income will be higher than usual in a particular year—if you sold a family business, for example, or had a good year in the markets.

    6. Check your withholdings

    When calculating your withholdings, it really pays to do the math. If you're getting a big refund then you're giving the government an interest-free loan. If you owe significant taxes and penalties every April, you're cheating yourself.

    7. Don't overpay on investment taxes

    Not long ago, sophisticated portfolio management strategies like tax loss harvesting were primarily offered to wealthy investors with multi-million dollar portfolios. With Schwab Intelligent Portfolios, automatic tax-loss harvesting is available for taxable accounts with $50,000 or more. By selling shares that have declined in price since purchased, this technique allows those capital losses to offset capital gains, as well as reduce your taxable income. For more on Tax-Loss Harvesting, see "Tax Loss Harvesting: A Silver Lining on Investment Losses."

    Make your money work harder

    8. Be frugal with investment fees

    Think investment fees don't matter? Think again. For example, over a 20-year period, a $100,000 portfolio with no advisory fee would yield $60,643 more than that same portfolio with a 1% advisory fee. Schwab Intelligent Portfolios does not charge advisory fees, and features ETFs with lower operating expense ratios and bid-ask spreads. The lower fees mean you'll have more money to invest.

    9. Don't overestimate your risk tolerance

    One of the first signup steps with Schwab Intelligent Portfolios is filling out the Investor Profile Questionnaire, where you answer questions related to how long you plan to hold your investments, how you're planning to use your earnings and your risk tolerance. Be truthful when you fill this out, as it's better to prepare your portfolio now to help you stay the course if markets get choppy. And if the markets do go south, don't panic. Your portfolio will continue to be invested in the target allocation you select, which may help soften some of the volatility.

    10. Stick with your investing strategy

    Investors can be fickle. They tend to pile into markets after years of gains, only to panic and cash out at the bottom. The Investment Company Institute reports that from January 2007 through July 2014, an average of $12 billion flowed out of long-term U.S. equity mutual funds when the S&P 500 had a negative return. But in the 12 months that followed the worst outflows, the stock market tended to outperform the average rate of return of the S&P 500® Index. You can avoid this cycle—and missing out on returns—by having a well-thought-out plan, and then staying the course even as market conditions change. If you have a Schwab Intelligent Portfolios account, the technology will automatically rebalance your portfolio to help it remain in line with your target allocation.

    Please see the Schwab Intelligent Portfolios™ Disclosure Brochure for information related to the cash feature in Schwab Intelligent Portfolios. A higher cash allocation can affect the risk profile and performance of a portfolio.

    Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their Schwab Intelligent Portfolios™ account. Clients must enroll to receive this service.

    Schwab Intelligent Portfolios™ charges no advisory fee. Schwab affiliates do earn revenue from the underlying assets in Schwab Intelligent Portfolios accounts. This revenue comes from managing Schwab ETFs and providing services relating to certain third-party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution.

    Diversification, dollar cost averaging, and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.


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