The Financial Checklist Manifesto

How To


The central line is a mainstay of modern medicine: a catheter inserted directly into the jugular to administer drugs, monitor blood pressure, and facilitate a dozen other vital tasks. If a tube running into your jugular vein gets infected, you are screwed. And patients at Johns Hopkins Hospital were getting sick and dying from central line infections.

So the hospital applied a new technique to the problem. It wasn’t a new antibiotic or type of catheter. Author Atul Gawande reports that the new technique reduced the incidence of central line infections from 11 percent to zero. The title of Gawande’s new book gives it all away: The Checklist Manifesto. Did you wash your hands? Check. Clean the insertion site? Check. The whole list has five items.

A checklist is not the same as a to-do list. It’s a list of steps to be done in sequence in a particular recurring situation. A good checklist gets used over and over and is refined to the most important steps. As Gawande puts it:

Checklists seem to be able to defend anyone, even the experienced, against failure in many more tasks than we realized. They provide a kind of cognitive net. They catch mental flaws inherent in all of us—flaws of memory and attention and thoroughness.

The checklist has enjoyed equal success in other high-risk professions: flying planes (Captain Sullenberger used a checklist), building skyscrapers, and doling out venture capital. This made me wonder about personal finance—can checklists help us avoid preventable financial mistakes?

I think they can. Let’s start with a checklist you can make right now that will take the stress out of tax time. (Okay, 10 percent of the stress. But still.)

Tax time

April is just around the corner. Do you have all those annoying one-page documents you need? W-2s, 1099s, K-1s? Have you ever done your whole tax return and then received one last 1099 and had to file the dreaded 1040X to amend your return?

Yeah, I did that once. Now I use a checklist. My current one has eight items. It’s not tax time until everything is checked off. If I get a new client this year (please!), I’ll add their 1099 to the list.

Hitting the road

Here’s another dumb thing I’ve done. Twice. I’ve forgotten to pay the rent before going out of town. Dumb, dumb, dumb. Now, in the same place I keep my standard packing list, I have a list of things I might be forgetting to do before I leave on a trip: change money, pay the rent, file away credit cards (and noodle shop loyalty cards) I don’t need to carry in my wallet, check where the no-fee ATMs are at my destination, buy international data units for my phone.

Credit, debit, and direct deposit

Ever gotten the call of shame from the cable company informing you that your card was declined and (strongly implied) you are some kind of deadbeat? All you did was activate that shiny new card the bank sent you, with the new expiration date, and the new three-digit code, and, oh crap.

Guess how you solve this problem? Magic! Okay, a checklist. I keep a list of every place my credit card, debit card, and bank account information (for direct deposit) is on file. When I get a new card, I work down the list. Almost all of it can be done online.

Similarly, I have a change of address list for when we move, so they don’t send my 1099s to the wrong place.

Da bills

You would never just totally forget to pay your water bill and get slapped with a late fee, so I’m not even going to mention it.

The annual report

Every year, after we do our taxes, I like to go through a short checklist that asks questions like:
• Are we meeting our retirement savings goals?
• Do we need to make any changes to our health insurance during open enrollment?
• What vacations are we planning to take in the next year, and how much will they cost?
• Are there any major household purchases we’d like to make in the next year? (Is any furniture wearing out, for example?)

Where do you keep your checklists?

A checklist is no good if it isn’t there when you need it. I’m online most of the time, so that’s where I keep my checklists.

I use a service called Backpack. With Backpack, I can make as many lists as I want, check items off, rearrange items, email myself a list, and share lists with family and friends. It’s like Mint for everything else in my life besides bank accounts and budgeting. There’s a free version that might well have plenty of capacity for your checklists.

You are smart, but…

Throughout The Checklist Manifesto, Gawande uses the word “stupid.” Yes, it is stupid that we have to use a checklist to remember to pack socks for our trip or wash our hands before sticking a tube into a patient’s neck. A checklist reminds us to do simple things we probably wouldn’t have forgotten anyway. It requires us to admit that there’s a bit of the absent-minded professor in each of us.

But checklists work. They help us do the important but boring stuff so our brain can concentrate on more interesting things, like inventing flubber.

I can live with being Fred MacMurray. Can you? I’d like to hear your financial checklist ideas in the comments.

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