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AARP Bulletin

Financially Speaking

Declutter Your Finances: Put Your Wisdom to Work for You

Consider consolidating accounts, choosing fewer investments

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If your bank accounts are scattered, gather them, too. Fees drop when you keep enough money in a single institution. Banking online is simpler than writing checks by hand.

Declutter your investments. If you own individual stocks, get rid of the dogs you haven’t wanted to confess to. Then consider whether you want to own individual stocks at all. Blue-chip companies with rising dividends are only part of a growth and income strategy. When you rely on a limited number of stocks, “you’re probably not well diversified,” says financial planner Joseph Tomlinson of Greenville, Maine.

Choose fewer funds

In general, the more experience investors have, the less they favor individual stocks (too many bad surprises) and the more they rely on mutual funds. But fund portfolios need decluttering, too. There’s no reason to own 10 or 15 of them, Tomlinson says. They probably overlap each other. If you choose well-diversified funds, such as low-cost index funds that follow separate markets, all you need is a broad U.S. fund, a small-company fund, an international fund and an intermediate-term bond fund, spreading your money among them in whatever way you think is best. You might also consider a target-date mutual fund that allocates your investments across these sectors in a manner appropriate to your age, or an immediate-pay annuity, to create a guaranteed income for life.

Low-fee funds save you money, too. Paying 2 percent on a $250,000 fund portfolio is like writing a check for $5,000 every year. With index funds, you could pay $60 or less. I mentioned that our growing wisdom and experience help us make sound financial decisions right into our 70s. After that, however, the news is not so good. The decline in our fluid, quick intelligence catches up with us. It becomes easier to make mistakes. That’s the other great value of simplifying your financial life, Weber says. You’ve got your systems in place for when the shaky days come.

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW.

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