New Year’s reckoning.

It is time for your annual financial review.

Yes, it is time-consuming. It may take you a day, a couple, a week, or a month to go through all your last year’s financial activities. Additionally, this is a good time, a traditional time for review because you will be receiving all of the year-end reports that show cumulative activity: your cash and credit card accounts, investment and pension accounts, insurance if you have variable life, or cash value build-up, your expenses — “ I spent that amount on that? What was I thinking!”

It is true that the number of people who find this exercise tedious, boring and overwhelming are many, measurable by their complaining, and/or finding any excuse to put the chore off. Uh, you don’t want to do this, I know you don’t, however ...

There are three reasons you must do review your finances once a year, or more, if needed:

1. No one, but no one, can manage your money the way you can.

2. If you don’t manage your financial affairs, you haven’t a clue where you’ve been, where you are, or where you are going.

3. Neglect your finance review, when something goes badly wrong because your identity was scammed, you will never know — until it is too late. Then, you only have yourself to blame.

If you can live with those three rules, feel comfortable with where you are and how you handle your life, or just don’t care. Then, move on to another article.

For the interested readers, set up a table, a desk, cup of tea or coffee, a glass of wine or beer, and start. Don’t procrastinate. Just start.

And to make this chore feel a bit easier, I promise not to write about it every week — although we can put that to a vote. How many want this series to run straight through until it is done? E-mail me and let me know.

Here is the list of financial items that we are going to review, along with the topics related to your finances. This is list is not necessarily complete or inclusive.

1. Cash: checking, savings, term deposits, money market funds, currencies, cost of exchange, what banks, what countries, interest returns, titling — whose name(s) are on the account, how do you access your accounts? And, if you are one of those unfortunate people with ties to the United States (US. Citizen, green card holder, or spending more time there than you should) we’ll discuss that, too.

2. Credit and debit cards: interest rates, penalty costs, what banks, what countries, balances, paydown methods, withdrawal limitations, other considerations.

3. Assets: structures (property and other assets) owned, and loaned.

4. Investments: performance, administrative costs, benchmarks, types, funds, manager fees and commissions, security sites, asset allocation, adherence to Bermuda Investment Business Act policies.

5. Debts: mortgages, personal loans, what do you owe, who do you owe, are last year’s records correct, do you know if your principal is being reduced monthly and accordingly? What is a guarantor, as you one even though it is not your property? How to use a simple internet mortgage calculator to check those numbers.

6. Employee benefits. No one ever really seems to notice this category, aside from the fact that certain items are deductible from your gross pay. But, what do they mean to you? What are you entitled to? And are you taking advantage of all benefits offered? Small business cannot provide ‘golden’ benefit policies, but what they do offer should be understood clearly. What does your health insurance cover? Who is covered? What is your co-pay rate? Is there a wellness discount? You get the — health — picture. Do you have access to group life insurance and disability benefits?

7. Insurance: Life: where are your policies, what do they cover, how much do they cost, who are the beneficiaries and why, are there sub-accounts invested in capital markets, is there a cash value or a dividend, how does that work? Medical: what are you paying, what is your lifestyle, what can you change, what is offered? Property: cost, coverage, riders, liability, reimbursement procedures. Business: interruption policies, slip and fall, business prevention of loss policies. Are you practicing good business cash management? That policy and procedure may matter to the insurance company if you file a lost business claim.

8. Retirement and pension accounts: tracking your contributions, tracking your employer’s contributions, rate of return, what are you invested in, tracking the costs charged by your pension administrators and investment portfolio managers. Tracking your drawdown account? What the Bermuda Investment Business Act 2003 and Amended 2012 states regarding due diligence, marketing, and client care. Tracking your Government pension. When can you collect? How much? What if you retire abroad? Annuities. What is the rate of return? Is the annuity adjusted for inflation? What is the difference between variable and ordinary? What are the fees — they can be quite high, you need to know who is getting what and compare to the service you receive.

9. Estate and legacy. So often heard: “I don’t need a will, I have no assets.” If you worked, and both you and your employer paid in, you have at least one asset. Your Bermuda National Pension. If you have children, you need a will. Let’s walk through the minimum of what is needed to protect your family, or provide for your family if you die prematurely. Statistically, I know that half of you that read this do not have a will. Lately, I’ve met a few relatively famous and wealthy people. They don’t have wills, either. What is it with us that we cannot face the fact that we are mortal? Or is it because it is just too much work?

10. Other issues — I will touch on cross-border planning, but not a lot. I get complaints about too many of those ‘tax’ articles already.

Ready, Set, Start.

Round up everything. All your bank statements, receipts, fund year-end statements, wage statements, everything. Put them into manageable piles by the categories above.

Cash. Why do you think are we even looking at this category? Banks are paying no interest, and charging you fees for having it sit there.

Think of cash differently.

a) How much do you need for emergencies or if you lost your job? How much depends upon how long you think it might take you to get another job. Keep enough liquid cash (not tied up at all) to pay for Bermuda living expenses — matching Bermuda dollar assets to Bermuda dollar liabilities. This cash bucket is matched to your local expenses.

b) Now, seriously consider converting the remaining liquid cash into major nation currency savings accounts. If you have ties to the United States, buy US dollars. If your ties are to the UK, then consider pounds sterling, or Euros. Keep those accounts segregated for your foreign purchases and travels, education expenses, retirement, etc.

You aren’t earning any interest, but you have just diversified your cash assets.

c) Money market funds. Oh, you’ve got some cash invested there, too. What would you say if I told you that your bank is charging you more in management and administration fees than you are making in interest? Do the maths — $100 dollars invested in a local money market fund at a local bank is being charged 65 cents (0.65 percent) for fees, administration, et cetera, while you are earning — exactly one cent (. 01 percent). This is an erosional drip on the value of your money.

Those of you with ties to the United States should be reporting these accounts, including the money market fund on your FBAR report. But, you should not be invested in foreign money market funds at all. They may be considered Passive Foreign Investment Company (PFIC) funds. The US Internal Revenue Service just released the new PFIC rules and they are a costly migraine-driven nightmare just to read, let alone to comply with.

Your first positive step is underway. Stay tuned for more cash review, then onward into the rest of the topics. Let me know by e-mail if you want the sequence to follow each week.

Last week’s article on the Six Month Rule generated a number of e-mails. I will respond to those within the month.

Martha Harris Myron JP CPA PFS CFP is a Bermudian journalist and a cross border financial planning specialist. Pondstraddler Life™ Consultancy provides offshore financial perspectives for international citizens living, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle: United States, Canada, United Kingdom, Europe, and the island of Bermuda, the premier international finance centre.

Contact martha@pondstraddler.com