Set It and Forget It? Part 2

I'm baaaaaack. Craig said the readership for last week's blog was so outstanding, he'd let me carry on the discussion about checking up on your financial circumstances. For those who didn't read last week's blog, I am honored to be the first guest blogger on Dough-Nuts. I am less honored to be Craig's brother, Andy. Before I jump back into my topic, Craig wants me to plug that you can bask in the glory of guest-blogging as well, just reach out via the Ask Me! section of the site. Now, let's talk about the other investments in your life and the importance of checking up on them over time.

This reminds me of the time Craig enlisted me in the Coast Guard without my knowledge.

Mortgage A house can be a great personal choice, but it can also serve as a good investment. I purchased my house about 8 years ago. I had been comfortable with my monthly mortgage payment all those years, with a relatively low-interest rate on my original loan. I was hesitant to refinance, or "refi" as the cool mortgage lenders call it. I had always heard that refinancing costs can outweigh the savings (they can, of course). But when I saw interest rates dip to historic lows late last year, I felt compelled to investigate. I enlisted my brother to crunch some numbers. Despite the refi costs, with the lower rate available in the current market I was able to refinance to a lower monthly payment that will save me a few thousand dollars in interest over the life of the loan. And I will also have the option to invest some of the money I am saving on reduced monthly payments. In the context of the value of a house and many years of mortgage payments, a few thousand dollars may not seem like much, but I was glad that I spent the time investigating options, applying for, and closing on the new loan.

HSA and Other Miscellaneous

One last example of when setting it and forgetting it can go wrong. Craig wrote about Health Savings Accounts (HSA's) already, but I'll give you my personal experience. My employer offers an HSA (Health Savings Account) for those enrolled in a High Deductible Health Plan. Side note: an HSA is a great investment opportunity for those looking for a pre-tax option beyond their 401(k). When the new calendar year benefits were announced, my company opted to switch HSA providers. Being diligent, I made sure to close out my account with the old provider and transfer my existing funds to the new HSA provider. If you have more than a certain amount in your HSA for health costs (usually $1000-2500), most HSA's will allow you to invest the excess in an investment account so that you can achieve earnings beyond the low-interest rate on your balance for healthcare expenses. Investments can be managed like a 401(k) and can be liquidated as needed for medical expenses, or supplemented if you still meet the threshold to invest.

When we made the switch to a new provider, I thought that I had done my hard work of quickly transferring the funds and allocating a portion to my HSA investment account. On a whim, I logged in to my new HSA account about a month later to find that, while the balance had in fact transferred to "investments", the funds were put into a default money market account earning about 0.36% annually. While that's a better rate than you would get in most checking/savings accounts, or even a CD these days, it is a far cry from the return you could expect in a well-diversified stock portfolio. I spent a couple of hours reallocating those funds to specific index funds, REITs, etc. offered in the investment platform. Hopefully those few hours of effort will pay dividends (literally and figuratively) in the future.

Conclusion The takeaway that I would like to convey to my fellow Dough-Nutters with these guest posts is that it pays to actively manage your money, regardless of how (or how much) you're saving or investing. There may be people who are content to follow the basic setup procedures and check in every year or so to make sure they still have the correct login credentials to their accounts. However, I would encourage you to assess your financial plan and investments at least quarterly. The sum total of your efforts might only be a few thousand dollars due to missed overcharges, HR oversights, and unwise investments over your lifetime. But for me, and one of the most successful investors in history, the effort to minimize your costs and maximize your return can be worth it.