As warmer weather arrives and households tackle spring cleaning to-dos, it is the perfect time to bring a simplified approach to your finances and “clean house.” Here are considerations for how to “spring clean” your finances:
Tip #1: Review Statements
Gather together your latest financial statements, including bank accounts, investments, credit cards and retirement savings as well as insurance policies such as life and disability. This “financial audit” can help give you a complete view of your finances. If you don’t use any online tools for financial planning, this may be the time to get started using one.
Understanding your financial situation is worth the effort. This process helps you see whether you are on track for long-term financial goals such as retirement. It can also be a good reminder to consider bumping up contributions to help with retirement readiness or make sure your life insurance coverage is enough to protect your family.
Tip #2: Organize Files
Once you’ve collected your latest financial statements, put in place an organized filing system. If you receive electronic statements, organize and file away these items on your computer or in the Cloud. For hard copy statements, file the last three to four statements (or scan them and file electronically to cut down on clutter). Tax forms should be kept for about four years in case the IRS comes knocking.
Tip #3: Consolidate Accounts
Over the years, you may have accumulated multiple accounts — 401(k)s from previous employers, IRAs, bank accounts, credits cards. All this financial clutter can be overwhelming. Consider consolidating financial and retirement accounts and reducing the number of credit cards, ideally to just two credit cards to better manage expenses and debts.
Having lots of credit cards can actually negatively impact your credit score, so resist the urge to get a discount when making purchases by opening store accounts. Keep cards that you’ve had for the longest amount of time, as they have the most credit history attached to them. Also look for cards that offer reward or point programs. Another consideration: Accounts may have annual maintenance fees, and the more accounts you have, the harder it is to monitor fees and charges, as well as overall expenses.
Tip #4: Get Your Arms Around Monthly Cash Flow
Doing a deeper dive on credit card spending can help you see where you are spending money and how you could make some tweaks. Think about what expenses are for “needs” versus “wants”, look at where you may be paying for “bells and whistles” when you only use basic services, and track expenses from the past three months to see where you may be throwing money out the window.
Spring cleaning your finances can be a liberating experience, putting you on a stronger financial path and improving your retirement readiness. So, while you’re attacking those cobwebs in the corner of the spare bedroom, take a swipe at the dust collecting in some of the rooms in your financial house!
A little more about us:
Compass Financial is an independent, fee-based financial advisory firm in West Des Moines, Iowa. The Compass Team helps individuals and families develop an inspiring vision of their financial future and a realistic strategy.
By listening closely to our clients’ true needs, wants, hopes, desires and dreams we are able to combine Wealth Management and broad Financial Planning customized to each individual situation. It’s our goal to assist you in developing a personalized financial road map. The results from the process should include confidence that comes from planning. As we all know, life happens, sometimes ambushing the best laid plans. Accepting a new reality and adapting the financial plan is work we have done many times for our clients.
We also offer Financial Check Up or Second Opinion Services to those who want to enhance the service they are already receiving. This should lead to a better understanding of your current plans and give added confidence to your existing advisor relationship.
Sometimes life’s biggest challenges come in the form of transitions, retirement, marriage, health issues, divorce, unexpected loss, or even college savings. Our team at Compass has experienced many of these life transitions, it’s our hope to come alongside you and your family. These defining moments of life provide opportunities to implement financial strategies that can have long lasting impact. The first step is always the most difficult, but can also be the most rewarding. Please Contact Us today to receive your free, no obligation, one hour initial consultation!