As the weather starts to get a bit warmer, you might be thinking about spring cleaning in your home. It’s time to clean up and run a few boxes of unused items down to your local Goodwill.
While you’re at it, you might want to take the time to spring clean your finances.
Start With Your Budget.
Since your budget or spending plan is probably the most important piece of your financial plan, start here. Take some time to go over your spending during the past few months.
Do you notice any problem spending areas?, or are there any areas where you’re budgeting more than you need to?, adjust your budget accordingly. While you’re at it, see how well you’ve been doing. Have you been sticking to your budget? If you find yourself constantly tweaking your budget throughout the month, you’re spending too much time on it. Work to simplify your budget.
Clean Up Your Accounts.
Now is a great time to consolidate accounts, and get rid of unused accounts.
If you have multiple bank accounts open that you rarely use, consider closing them. If you’re unhappy with your bank, now is a great time to switch.
Retirement Accounts and Investments
Many people have at least one retirement account from an old employer sitting around. Instead of dealing with multiple 401(k) accounts, roll them into the one to streamline your retirement savings.
Look at your 401(k) beneficiaries. If you haven’t updated that information in a while, you could still be listing your parents as beneficiaries of a 401(k) you got at your first job. If you’re married and/or have children, you’ll probably want to change that. The same goes with a divorce, you probably won’t want your ex listed as a beneficiary.
Consider increasing your 401(k) contributions. At the minimum, you should be putting enough aside to take advantage of your employer's full match.
Opt For Less Paper.
Most accounts these days offer a paperless billing option. Opting out from receiving all those paper bills in the mail, especially if you use online bill pay, can cut back on clutter, paper, and help out the environment.
Check Your Withholding.
Tax return checks seem wonderful. But if you received a sizable return this year, it just means you gave Uncle Sam an interest-free loan throughout the year.
When setting up your withholding, your goal should be to achieve a balance. You want to get as much as possible in your paychecks without owing the Internal Revenue Service money when you file your taxes. So adjust your withholding as needed to get to this point.
Create A Home Inventory.
If you have homeowners or renters insurance, which you should, you need to have a home inventory of all your possessions. An inventory will make it much easier to replace your items in case of a disaster.
So if you don’t have an inventory, it’s time to make one. Take photos of most of the items in your home, especially big-ticket items such as electronics and furniture. Then, write down the approximate amount that you paid for the item, and start saving receipts for new items you bring into your home.
I'm actually surprised that more consumers don't do this. If it’s been awhile since you shopped around for better rates on your car insurance, cable, cell-phone plan, or other recurring items, now is the time. You should be shopping for better rates at least once a year, preferably twice, to ensure you’re not overpaying for services.
Check Up On Insurance Coverage.
When was the last time you reviewed your auto, homeowners or life insurance policies? It may be time to give your insurance a check-up. Review your policy documents to ensure you have adequate coverage.
For instance, many people purchase life insurance, pay the premium, and forget about it. That may be fine if you don’t have any life events that change your insurance needs. But you may want to take another look if you have recently married or divorced, which means that you should update your beneficiaries. Perhaps you've received a substantial increase in pay, which affects the amount your family will need for income replacement. The birth of a child will certainly require you to increase the amount of life insurance needed to cover child care, college costs, and other expenses. Last, but certainly not least, a new mortgage can certainly become a burden on the family in the event of a loss of a wage earner.
With all this in mind, one in four Americans say they need more life insurance, but only one in 10 say they are likely to purchase a policy in the next year. If this is your year to take the life insurance plunge, our Financial Calculators can help you assess your financial needs.
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Housing construction materials and other building costs are not getting any cheaper, you may also need to upgrade your homeowners insurance policy to ensure you could rebuild in case of a total loss.
Sort Out Paperwork.
This step is great for spring cleaning both your home and your finances. Take the time to sort through your paperwork and files, and shred the documents you no longer need. Consider scanning and electronically filing the documents you decide to hold on to.
For instance, the federal government recommends that you only need to keep bank statements for a year, and you can discard tax documents and their supporting records after seven years.
*** Be sure you adequately shred any documents that include personal information. ***
Credit Cards and Debt
Haven’t checked your credit score in a while? According to a 2013 study by the Federal Trade Commission, 5% of people have errors on their credit report at one of the three major reporting agencies—errors that might be hurting their score and forcing them to pay more for loans and insurance.
Pull your reports from all three major credit bureaus. You may order them at AnnualCreditReport.com, review them, and ask that any errors be corrected or removed.
Give these areas a good spring cleaning and head into summer with your finances in good order.
RDS Financial Services can help. Call us today to schedule your free consultation.