6 Tips to Help Spring Clean Your Finances

6 Tips to Help Spring Clean Your Finances

With warmer temperatures and more daylight comes pollen – and the urge to deep clean everything. Spring cleaning isn’t only for your closets, though. And considering many of us have spent the last few months in self-quarantine due to COVID-19, you’ve probably already organized the pantry, decluttered the bedrooms and scrubbed the grout. What’s left? Dust off your finances and give yourself a fresh financial start this season by following these six tips.

organizer with flowers

1. Take financial inventory. Then declutter. Collect all of your financial information in one place: credit reports, bank accounts/statements, credit and debit cards, retirement and HSA accounts, investment documents, additional debt, etc. For paper records, shred everything you don’t need. Most financial documents1 can be thrown away after three years, though records of loans that have been paid off and tax returns should be kept for a minimum of seven years. For virtual records, create a digital folder where you can easily find and store documents. It’s been suggested to use a password manager2 to store the usernames and passwords for your financial accounts.

2. Streamline accounts. It’s easy for all sorts of “stuff” to accumulate over the years – including financial accounts. Maybe you have a 401(k) from an old job, an HSA you aren’t able to use with your current health care plan or an “extra” savings account without much savings. Take a minimalist approach and keep only the accounts to which you have direct access and use and/or monitor regularly. Keeping accounts open only to collect dust could increase your risk of identity theft. The exception is unused credit cards; canceling a credit card will change your debt-to-credit ratio and could lower your credit score.

3. Scrub poor spending habits. For many of us, the current health and economic crisis has helped to minimize impulse purchases and overspending. If you haven’t done so already, take a close look at your bank statements to eliminate unnecessary expenses. Canceling subscriptions or memberships you don’t use, for example, could save you hundreds of dollars or more every year. Challenge yourself to cut expenses by 10% each month for the next quarter and you’ll likely see what you really need and what you can live without.

4. Recalibrate auto-payment dates. Did you know you can change when your bill payments are withdrawn from your account each month? You can also change the dates when your bills are due. Take inventory of the auto pay and due dates to better align with your paychecks.

5. Automate your savings. Once you’ve cleaned up your accounts and spending habits, you might find that you have more money to put toward savings. Decide how much you can allocate for savings and consider setting up a direct transfer. Similar to automatic payments for bills or direct deposits of your paychecks, you’ll automatically “pay yourself,” helping to build your emergency fund or save for vacations or home renovations without thinking about it – or having to fight the urge to spend that money elsewhere.

6. Literally clean house. Do you struggle to throw things away? Do you simply shuffle stuff from room to room? Spring is the perfect time to dig deep and finally get rid of what you don’t truly need or want. Host an online yard sale. Sell children’s clothes and toys, furniture and household items on sites like Craigslist or Facebook Marketplace. What you can’t sell, donate. Keep your donation receipts in case you decide to claim a tax deduction for charitable giving.

Take spring cleaning one calculation or account (or cabinet or closet!) at a time. Whether you’re cleaning out the garage or cleaning up your finances, you don’t need to tackle it all at once. These are challenging times. Go easy on yourself, stay positive and most importantly, take lots of breaks.

                                                  

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

1 Retrieved from https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

2 Retrieved from https://www.techradar.com/best/password-manager