If you’re looking for a good reason to balance your checking account and sift through dusty piles of unopened bank and brokerage statements, here’s a once-in-a-lifetime opportunity: Organizing your finances now is the smartest way to avoid computer-related headaches come the year 2000.
The idea is to be prudent; this isn’t about planning for the sort of Year 2000 Armageddon the doomsayers are talking about.
“If you have sloppy practices and assume it will all work out fine, this is a good time not to have sloppy practices,” says John A. Koskinen, chairman of the President’s Council on the Year 2000 Conversion.
The Year 2000 problem, commonly known as Y2K, occurs when older computers that are programmed for dates with two digits representing the year malfunction or shut down. While they now read “99” as 1999, for example, they could interpret Jan. 1, 2000 (“00”), as the year 1900.
Koskinen and other experts say that the financial system itself isn’t likely to be rocked by major Y2K computer problems. He says the good news is that the financial-services industry generally, including banks, brokerage firms and investment banks, is “basically ahead of most of the industry in the U.S.”
And Ellen Seidman, director of the federal Office of Thrift Supervision, says that the likelihood is high of there being one or two institutions that “have a little trouble.” Seidman is quick to add that any trouble “will be of the kind that will be sorted out quickly; 97 percent of all institutions have the highest rating” for Y2K preparedness, she says.
Yet no matter how prepared the industry is, regulators and other experts say that it makes sense for individuals to protect themselves against any potential problems.
“It’s like taking an umbrella on a day with light drizzle,” says Frank Hartigan, project manager for year 2000 initiatives at the Federal Deposit Insurance Corp.
Hartigan and other experts say that the following steps should keep any computer glitches from ballooning into major headaches:
– Save bank, brokerage-firm and mutual-fund records and check them against transaction records. Anyone who normally throws account statements away unopened or stuffs them into the sock drawer needs to change their practices by midsummer. That’s because checking new statements against old ones is one of the best ways to protect against computer-related foulups.
“It’s a good idea to start reconciling your bank account,” says E. Jeffrey Berg, director of the Year 2000 Project at Citigroup’s Salomon Smith Barney brokerage-firm unit.
Investors should keep their account statements and the confirmations they receive when they buy or sell securities, says Nancy Smith, director of the Securities and Exchange Commission’s Office of Investor Education and Assistance. “That will be enough to establish what your holdings are if the electronic record is destroyed in any way,” she says.
– Make sure your bank accounts are within federal insurance limits. While a bank failure because of the date change isn’t likely, the FDIC reminds depositors that accounts are insured up to $100,000 at any one insured institution. Deposits over $100,000 at any one bank may also be covered by the federal insurance program if some of the money is held in different types of ownership accounts, such as a joint account or a retirement account.
– Review your mortgage and consumer-loan statements. “If you’re concerned that your loan is not amortizing properly or your payments are not being credited properly, you should get a payment history,” says Hartigan of the FDIC. In most cases, the information a borrower needs can be found in his most recent account statement.
– Verify direct deposits or payments. “Go to your ATM and verify that your account has been credited,” Berg says. “I’d do that in November, December and January.”
– Pay special attention to local income tax, property tax and utility bills. While the financial-services industry has spent millions upgrading its computers for the year 2000, some local governments have “taken the position it’s not something they’re going to worry about until it happens,” says Koskinen. “It’s a high-risk strategy.”
As a result, some homeowners could find errors in their property-tax or utility bills or find themselves dunned for payments they have already made. To protect themselves, individuals should keep records of their old income tax, property tax and utility bills, and then check their new bills for any significant discrepancies, Koskinen says. They should also keep a photocopy of these bills and the check that is sent as payment.
– Make sure computer hardware, software and operating systems are compliant. Whether they use a software program to track their finances, pay their bills or trade on-line, individuals need to make sure their computer systems are ready for the year 2000. That means calling the manufacturer or logging on to its Web site to see if any upgrades are needed.
In some cases, individuals may have to replace outdated hardware or software. But, in most instances, they should be able to obtain any needed upgrades from the manufacturer.
“Toward the middle of the year, customers should start doing basic maintenance–checking our Web site or calling us to see if they need a patch to stay current,” says Mark Goines, a senior vice president with Intuit Inc., maker of Quicken personal-finance software.
Goines says that Intuit plans to provide free solutions for customers with older versions of Quicken. He expects that newer versions will be updated via the company’s Web site. “There really isn’t a lot of work for the customer,” he says.
Managing Your Money, another popular software program now available only through financial institutions, has always been year 2000 compliant, says a spokeswoman for its manufacturer, Mecca Software LLC.
If people don’t make the needed upgrades, “as a general matter, records won’t disappear,” Koskinen says. “But the computer won’t be able to process new information or the information will be mischaracterized.” That might mean, for instance, that checks or payments will show up out of order, he explains.
As a safeguard, individuals should back up the data on their computers and print out key records.
– Get extra cash. If you think the banking system will run out of money, forget it. The Federal Reserve, which normally keeps roughly $150 billion of cash in inventory, will have $200 billion on hand to meet any extra demand related to the year 2000, a Federal Reserve spokeswoman says.
Still, most experts say it makes sense to take out some extra spending money just before year’s end. “I’m not worried about ATMs not functioning,” explains Berg. “I’m more worried about them being empty.”
Berg says he is also concerned that problems outside the banking system could increase the demand for cash. “If a grocer’s check-cashing system is down, it may be reluctant to take your check,” he says.
Just how much money is enough? That depends on an individual’s preferences. “We’re saying that during the date change individuals should take out as much cash as they would need for any holiday weekend,” Hall says. “All other forms of payment will be available to you after the date change. Checks, credit cards and debit cards will all be accepted.”
Berg, however, suggests taking out a week’s worth of spending money. At the opposite extreme is Seidman of the Office of Thrift Supervision. “I’m planning to use my ATM card on Saturday,” Jan. 1, she says.
– Don’t panic. Regulators say that individuals should avoid taking drastic steps, such as taking all their money out of the bank or putting their savings in the hands of a financial adviser who offers to safeguard it against Y2K problems.
Another mistake is to take physical possession of stock certificates. “When you have a certificate, it can get stolen, it can get lost, and it’s very inconvenient when you want to liquidate that position,” says Dawn Lepore, chief information officer for Charles Schwab.
– Ask questions. If you have any concerns about the steps your financial institution is taking, give it a call. Financial institutions “are all going to have programs” for the year 2000, says Jodie Bernstein, director of the Federal Trade Commission’s Bureau of Consumer Protection. “A common sense kind of thing is to find out what they have to say.”
