5 Ways to Jump on Spring Cleaning Your Finances
Warmer weather is right around the corner, and you’re just about ready to tackle spring cleaning. In addition to clearing your closets of winter gear, now’s the time to clean up your finances. Use these five tips to get a jump on filing, organizing and prioritizing your money matters this spring.
1. Create Files for Your Financial Statements
If you’re like many Americans, you like to keep an eye on your finances. According to a recent Gallup poll, 85% of Americans agree with the statement, “You are watching your spending very closely.”
One of the best ways to stay on top of your personal finances is to set up a system so you have a place to file financial information, making it easier to quickly find what you need.
If you still get paper statements, head to the closest office supply store for file folders and filing/bankers boxes. Create files for the following (and pat yourself on the back for tackling both financial and regular spring cleaning):
- Credit card, credit line, loan and mortgage statements
- Investment account statements
- Bank account statements
- Income tax records
- Employment/self-employment/income records
- Utility and rental paid bills/invoices
- Insurance statements
If you receive your statements electronically, set up digital files on your computer to hold your electronic statements. You may also want to consider a secure cloud-based service for holding your electronic financial statements.
Next, file your statements and bills. The financial rule of thumb is to keep bank statements for a year, unless they’re needed for income tax filing, in which case you should keep them for seven years.
2. Prioritize and Plan
Once you’ve filed your current and previous year’s financial bills and statements, prioritize your goals to determine the next step in your personal finance spring cleaning. You may have one main goal, or several, for the upcoming year.
Common annual financial goals and activities include:
- Creating or updating personal budgets
- Creating or reviewing financial plans
- Setting investment goals
- Consolidating credit cards or loans
- Preparing to file income taxes
- Revisiting personal insurance coverage and needs
3. Create or Update Your Household Budget
Based on the goals you’ve identified for the new year, create or update your household budget. Remove any categories that are no longer relevant, such as debt repayment for a loan you’ve recently paid off.
Depending on what you’re hoping to achieve, you may also want to adjust your monthly savings amount and entertainment or grocery amounts.
4. Spring Cleaning, Not Weekly Cleaning
Think of spring cleaning as the time to work on your overall financial strategy, your “once-a-year” items. Now is the time to make big picture changes based on your new priorities and budget.
For example, if you prioritized updating your investments, take the time to review statements, fees, performance, asset allocation and accounts. Consider making changes to your weekly, monthly or annual contributions. Open or close accounts, based on your revised financial plans.
Whatever other goals you set, include these two important items on your financial spring cleaning to-do list:
- Collect the paperwork you’ll need to file your 2017 taxes in one place.
- Book an appointment with your financial advisor for professional expertise and help with your long-term financial planning.
5. Keep Your Finances Tidier in the Future
To make it easier to tackle your financial cleaning next spring (or even to do a six-month checkup in the fall), use these four tips to “tidy” your finances on an ongoing basis:
- Get in the habit of filing your financial statements as soon as you open them.
- Automate payments to your credit card, mortgage or loans so you don’t miss a payment in error.
- Set up automatic bill payments to your utility and other service providers from your credit card to simplify your monthly bookkeeping.
- Pay yourself first, with automatic contributions to your investment and savings accounts.
Once you’ve cleaned up your finances, take a short and well-deserved break before moving on to cleaning those closets.