3 Basic Financial Planning Tips for Moving
Key Points:
Immediately after a move, it is important to update addresses and personal information on all financial-related accounts, policies, and legal documents.
Cash flow needs and cost of living are very likely to change because of a move; it is important to budget for changes in cash flow needs and cost of living, especially if they are likely to increase.
One financial benefit of moving is the potential opportunity to take advantage of income tax deductions for donated items.
To help with the process, we generally recommend reviewing one’s Statement of Net Worth, calculating monthly average estimates of major expenses, keeping detailed records, and saving receipts.
When going through a major move or relocation, it is common to forget something along the way. Whether someone is moving a block away or moving across the country, years of accumulated items must be sorted and packed. In addition to moving a lifetime of personal effects, a move requires many administrative changes and financial planning considerations that, if not addressed, could restrict accounts or neglect potential savings opportunities. Some of the necessary financial planning considerations during a move are updating addresses and personal information, reviewing cash flow changes, and optimizing one’s current year tax situation.
Updating addresses and personal information is an important task to complete immediately after a move. The state of Illinois holds approximately $2.1 billion of unclaimed property at a given time.¹ This property (often money in checking, brokerage, and retirement accounts; payroll checks; and other dividend/premium checks) is reported to the state after the holder is no longer able to locate the property owner, or if there is no activity for a certain period of time (often five years). The process to retrieve this property is lengthy but can be mitigated by properly updating personal information on all property. The following checklist encompasses many of the administrative items that must be completed upon moving to a new address:
Update address on:
All passports, driver’s licenses, and driver registrations
All financial accounts (e.g., checking and savings accounts; brokerage accounts; individual and company retirement accounts; pension plans; and company stock plans)
All credit card accounts
All insurance policies (e.g., car, health, life, disability)
Utility bills, if applicable (e.g., cell phone, cable)
Legal documents, if applicable
Fill out a change of address form at the United States Post Office
Notify human resources (HR) at work of new address to change for pay checks or pay stubs
Make sure HR changes the state for which taxes should be withheld when moving to a new state
Most address changes can be completed online or by contacting each institution. Be sure to check if proof of address (such as a bill or valid ID) is required to make such changes. A common administrative item that’s forgotten is notifying HR of the address change, as this is not done automatically. In cases when moving to a new state, it is beneficial to request the change with HR as soon as possible so state withholding can be properly adjusted on future paychecks.
Cash flow, and how it may change with a move is another area of financial planning to review. When upgrading your home, it is common to incur higher costs to furnish and improve the home, thus requiring more space in the annual budget. It is recommended to budget for necessary or non-discretionary items first, such as rent/mortgage, other loans, insurance, taxes, utilities, and food. Another consideration in budgeting could be a change in the cost of living. If a move involves a job transfer to a different state–especially to areas such as San Francisco or New York–knowing the cost of living difference is helpful in salary negotiations and personal budgets.
Another item to consider when relocating is optimizing one’s current year tax situation as much as possible. Donating unwanted items to a charity could increase total itemized deductions and potentially reduce income taxes. For record keeping purposes, it is best to keep a detailed list of what items were donated to each charity on each date. In most cases, valuation of these items is based on the “fair market value”. Depending on the type of property donated and its value, there will be different rules as to how much can be deducted and what type of record keeping is required.
Prior to 2018, taxpayers were allowed to deduct moving expenses related to a job change that passed a 50-mile distance test. Unfortunately that deduction is no longer allowed (except for active duty military personnel) under the new Tax Cuts and Job Act that went into effect in 2018 until 2025.
Moving requires more than just the physical movement of personal effects – it also involves updating addresses and personal information, reviewing cash flow changes, and optimizing tax planning. Forgetting to change an address can result in a restriction or transfer of ownership to the state. A “Statement of Net Worth,” a summary of personal assets and liabilities, is a good resource to keep track of the accounts and policies that need updating. Moves can also result in increased costs of living. We generally recommend reviewing budgets to account for this change by calculating monthly average estimates of major expenses. Lastly, moves can create opportunities to reduce incomes taxes of the same year. We recommend keeping detailed records of donations. Moving can be quite overwhelming, and although something will likely be forgotten, be sure not to forget these important financial planning tips.
Sources
¹Illinois Treasurer, Stats and Facts