A few years ago, I had two banker’s boxes full of financial documents I just accumulated over time. Then, one day, I decided I would go through all those documents and actually decide whether I should keep, scan, or shred them. I purchased a Fujitsu ScanSnap S300 to scan any important documents and then some random crosscut shredder from Staples to shred the non-essential documents. Two bags of recycling later, I had rid my life of years of credit card and bank statements I’d never need and put all my important documents in a secure folder on my computer.

Here was my approach:

Long time readers of Bargaineering will know that in the last year I’ve been aggressively consolidating our financial accounts in a quest to simplify my finances. It seems fitting that, for Spring Cleaning Week, our second post of the series should be one about how to consolidate all the financial accounts you’ve accumulated in the last few years.

In an ideal world, you really need one checking account, one savings account, one credit card (debatable), and one brokerage account. We, of course, don’t live in a utopia, we live here. It doesn’t take long for financial accounts to accumulate like knickknacks on your bookcase or mantle. A change in job adds a 401(k), a change of address adds a new bank, and before long you have a dozen financial accounts you don’t even use every month with a few bucks here and a few bucks there.

While most of the battle is in just consolidating, I think that a few tips I picked up may help you in your quest.

Kiplinger has an article out this month called Stretch Your Paycheck where they point out eight ways you might be able to trim your expenses to make your money go a little farther. I’m a fan of these types of articles, even if some of the ideas are reused, because it can give you a few good ideas on the things you can trim out of your life.

For example, the simple idea of “Get rid of your stuff” is powerful because it’s not something you often think about. If you think about what you do on a day to day basis, how many of the things in your house do you never touch? How many articles of clothing have you not worn for over a year? Have you consider selling or donating it? What about those old cell phones you no longer use?

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There’s an old adage in investing that doesn’t get enough appreciation or attention – “If you don’t understand the thesis underlying an investment in five minutes or less, take a pass.” I only recently read it in a summary of a talk given by Vanguard CEO Bill McNabb at the Morningstar Investment Conference in June and the quote is attributed to Richard Ennis of the pension consulting firm Ennis, Knupp.

The idea itself takes fewer than five minutes to understand yet it’s so powerful. For year’s I’ve wanted to fully understand the complicated world of options investing. On the face of it, options aren’t difficult to understand. Call options are the right but not the obligation to buy the underlying stock at a specific strike price. Put options are the right but not the obligation to sell the underlying stock at a specific strike price. Easy.

It’s the strategies, the Greeks, and all the ancillary stuff that I can’t keep straight in my head without a quick refresher from a book. Which is why I have yet to buy or sell a single options contract.
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You never need more than one checking account. I have two and for the last year or two, as I’ve moved slowly towards simplifying our finances, closing the second checking account has always been on my “To Do” list but has never been scratched off. I’ve closed plenty of online savings accounts, like HSBC Direct and FNBO Direct, but not this checking account because it’ll require me to go into a branch.

What has it cost me? There are a few hundred dollars in the account, let’s say it’s around $500, and if you assume 2% interest (high yield savings accounts have been at most 2% in the last two years), it has cost me around twenty dollars. Twenty bucks isn’t a ton of money but I’d rather have it in my pocket than the bank’s!

What have you been putting off? Maybe it’s getting your emergency fund off the ground or rolling over a 401(k) into an IRA or perhaps it’s just setting up a CD ladder… but there has to be something, money-related, that you’ve been putting off for one reason or another?

A few years ago I took advantage of a Sharebuilder promotion code that offered $50 to new accounts after your first trade. I opened an account, deposited $50, and purchased $50 worth of IYT, which is the iShares Dow Jones Transport. Average ETF. When I received the $50, I withdrew it, netting me $50 for a little bit of work. A few people did this several times but I only did it twice.

The downside of the strategy was that while scheduled trades cost only $4 at Sharebuilder, real time trades cost $9.95 (all sell orders are real time trades). My plan was to keep the shares for decades, to let it appreciate, and then sell it whenever I needed it. Today I learned about a promotion code, sent out on flyers, for five free trades at Sharebuilder with the promotion code HVC09NY.

The promotion code is for market trades only, limit trades still cost $9.95. I run a small risk of being hosed by the market but it does let me close things out cleanly. The code appears to give five trades on one account and only one per person, so I’m stuck with one Sharebuilder account.

If you’ve been waiting to exit a position and balked at the $9.95 commission, now is your opportunity to exit it for free. One step closer to simplifying our finances!

It’s always tricky remembering how long I should keep financial documents so recently I began cheating by electronically scanning all my documents to my hard drive. I was able to save all the documents I really didn’t need, but was apprehensive about shredding forever, and created electronic backups for the documents I knew I should keep. It was the best of both worlds.

The end result, though, was a collection of poorly organized files. To help me create a system, I began reading online. When the NY Times Bucks blog talked to Alicia Rockmore, co-founder of Buttoned Up, she recommended a year-based file system.

“Have one file for everything that is tax- or finance-related per year,” she said. Then, download electronic records available online to the files and scan in paper copies of other documents as well.

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When I learned about E*Trade selling their banking business to Discover, I knew my days with them were numbered (I later learned that only bank accounts with no brokerage relationships were moving… but alas the ball was already rolling). Brokers are finding it increasingly difficult to differentiate themselves and when you can get good customer service at a cheaper cost elsewhere, even the pioneers are going to find their businesses suffering. Those who have been reading for a while may remember me mentioning my investments at E*Trade and how I’ve been doing any new investing with TradeKing. My original approach was to leave my assets at E*Trade until I sell them, but a recent offer changed my mind.

TradeKing has a promotion where they will reimburse new accounts, defined as opened in the last thirty days, up to $150 in transfer fees. My account is far older than that but I asked a CSR if they’d be willing to extend that offer to me and they agreed! (had they not agreed, I wouldn’t have transferred…) E*Trade has a $60 full account transfer fee, much less than the $150 reimbursement limit, that is paid using account assets. I’m not sure what would happen if I had $0 cash, but the simple solution was to transfer $60 into the account prior to initiating the transfer. If you plan on doing this, be sure you have the amount of the fee in cash or you might not like what the brokerage does on your behalf!

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