Even though the weather has only shown a few glimpses so far in Indiana, the first day of spring is only two days away. We all know what that means; time for spring cleaning. We’re going to get rid of the junk that we accumulated over the last year that we don’t use (and probably didn’t really needed in the first place) so that we have space for more stuff that we’re going to buy this year and we’ll do the process all over again next year.
I hope that during your spring cleaning process you take some time to clean up your finances. Just as with your home, a couple of hours of dedicated work on your personal finances can go along way. Although I wouldn’t wait a year to revisit it; a monthly check-in would be much better.
Here are some things you should consider for your financial spring cleaning:
Organize Your Documents
If you’re like most people, you probably don’t even know all of the financial accounts that you have. You have a stack of statements but haven’t opened half of them because you don’t want to take the time to understand what’s inside.
Developing a process to organize your financial documents can make your life easier and help you become more aware of your personal finances. You can use a folder structure on your computer or in a cloud storage system, or even use a physical filing cabinet. Some documents that you may want to consider having in your organizer include the following: tax returns, life insurance policies, other insurance policies, estate planning documents, end of year account statements.
Get rid of what you don’t need. You probably don’t need every single account statement you have ever received. If you want something to compare to, then just keep the end of year statements. You also don’t need all of those informational documents that you’ve received and continue to hold onto.
Organize Your Account Logins
Even if you don’t want to login and look at your account, it still may be worth setting up login information so that someone doesn’t fraudulently do it for you. If you already have all of your login information for all of your accounts, then now might be a good time to update the passwords – especially if multiple accounts use the same password.
Make sure that you store your login information in a secure place. (That sheet on computer paper on your desk isn’t cutting it.) It may be wise to let someone who you trust know where the information is stored and how to access it if something were to happen to you.
Update Beneficiaries
While you’re updating your login information, you should check and make sure that the beneficiaries on your financial accounts and life insurance policies are up-to-date. This will relieve a lot of stress and heartache for your loved ones if something were to happen to you.
Net Worth
Now that you’ve got all of your financial information organized you can create a net worth statement that will help you get a better understanding of your current financial situation as well as help you to track your progress each month.
Budget
Tell your money what you want it to do for you. I want you to change your mindset about budgeting – you shouldn’t see it as the dreaded “b” word. A budget is a way to make sure that your money is working for you how you want it to and helping you reach your goals.
Wile you’re doing this you can make a list of all of the subscription-based services that you pay for each month automatically without you having to actually make a payment. Out of sight, out of mind – sometimes people pay for services that they never actually use but they keep paying for them because it’s easier than canceling. Get rid of those subscriptions that you don’t really need and use that money for something that’s more important to you.
Increase Your Retirement Savings
Even increasing your savings by 1% each year can make a significant impact over the long run. You’ll probably not even notice a change this small in your take-home pay.
Increase High Interest Rate Debt Payments
If you have high interest rate debt such as credit card balances now may be a good time to increase your monthly payments so that you’re not continuing to pay steep interest charges into the considerable future.
Shop Around
When’s the last time you checked to see if you’re paying too much for insurance? You may be able to save money on your homeowner’s and auto policies by using an independent insurance agent who is able to provide you with quotes from multiple different insurance companies rather than using an agent who works for a big name company where they’re only able to provide quotes from the company that they work for.
Credit Report
Now is a good time to pull a free credit report from one of the three credit reporting bureaus and make sure that nothing looks out of place.
Set Goals
Set goals for what you want your money to do for you the rest of 2019: travel, save X amount, increase your net worth by X amount, save for a down payment, buy a new car, etc. No matter what your goals are, make sure that you write them down and put a date on them so that you’re more likely to reach them. This includes setting frequent check-ins to evaluate your progress.
Financial spring cleaning can be a great exercise to help you get on track, evaluate where you are, and create a clear path forward for what you want your financial resources to accomplish for you.
