Depending on where you live it may not feel like it, but it is officially springtime! Spring is one of my favorite times of the year. They say New Year’s is the time when you can start fresh, but I think spring is. The flowers start fresh, why can’t we? Typically springtime is when you start prepping your garden and airing out the house, but what about sprucing up finances? Spring clean your finances!
Five Areas That May Need a Financial Spring Cleaning:
- Budget and Debt
- Estate Planning
- Retirement accounts and investments
Questions to Consider About Your Banking to Spring Clean your finances
Has your filing cabinet become flooded with different bank statements you’ve been holding onto for safe keeping?
Financial planner Suze Orman recommends keeping bank statements for a year, and then you can toss them. If you need them for tax purposes, however, three years is an adequate amount of time.
Do you have accounts at multiple banks?
Some people keep money divided up between many banks simply because they wanted to take advantage of new account promotions. It’s easier to collect fees, however, if you’re utilizing different banks: overdraft fees, minimum balance fees, credit card interest fees, etc… streamlining accounts will make managing your money much easier.
Also, make sure your bank is working for you. In today’s competitive banking market, there is no reason you should not be making money on your money. Shop around for the best offerings. A bank I personally love is the online bank Ally Financial. They offer an interest checking account that has no monthly fees, yet still lets your money build interest.
Are you still getting paper bank statements in the mail?
Save a tree and lower your risk of identity theft by switching to receiving online statements only. If you prefer to have a paper copy, make sure you shred the statements before tossing them out.
Have you ever had to pay a late payment fee only because you forgot to pay a bill?
Switch to autopay whenever the option is offered. American households tend to have many different bills to pay all due at different times, it’s easy to accidentally overlook one. If you switch to an autopay billing option, payments are deducted automatically when they are due so it’s one less thing to worry about. Just be sure to occasionally review your statements to ensure the right amounts are being deducted.
Questions to Consider About Your Budget and Debt
What’s your debt-to-interest ratio?
If you don’t know this number, do a couple calculations to find out. Bankrate.com has a debt-to-income ratio calculator that can do the math for you. This number is important to lenders. It basically proves you don’t needlessly spend money you don’t have. The ideal number to stay below is 36.
What’s your credit score?
If you don’t know this number, find out. You may obtain a free copy of your credit report every 12 months. You can do so securely at websites such as annualcreditreport.com. Monthly monitoring of your credit score is also recommended. CreditKarma is a free app you can download on your phone which lets you easily track your credit score.
Do you owe on credit cards?
Tackle the highest interest debt first and get rid of it as quickly as you can, then move onto the card with the next highest interest. If consolidating is an option for you, this could be the best way to save on interest. Consolidating credit card balances onto one low-rate card can make paying off the balance much more manageable, but be sure to read the fine print to avoid transfer fees, introductory rates that expire, minimum monthly charges, etc.
Questions to Consider About Estate Planning to Spring Clean Your Finances
Do you have a will?
If you own anything, you should have a will. If you have children, you need a will. Drawing up a will isn’t complicated; you just need to set time aside to do so. U.S. News has an article that can help you start the will process: 10 Steps to Writing a Will.
Have you named a financial power of attorney?
A financial power of attorney is someone whom you designate to oversee your finances if you are not able to do so. If you could not physically or mentally handle your financial affairs, this person would take over, or even something as simple as distance being a factor. For example, a few years ago I moved from Minnesota to Montana, but I was in the process of selling my home in Minnesota, so I named my step-father my financial power of attorney to take care of the real estate closing since I was about one-thousand miles away.
Have you named a medical power of attorney?
Similar to financial power of attorney, but this individual oversees your medical treatments when you are not able to. Medical power of attorney only goes into effect if you do not have the capacity to make your own decisions. Medical and financial powers of attorney are often the same person, such as a spouse or adult child, but this is not mandatory.
» Learn more: The Importance of Having a Healthcare Power of Attorney
Questions to Consider About Your Retirement Accounts and Investments
Do you have more than one 401(k) or IRA?
Consolidating retirement accounts that share the same tax treatment can be beneficial for two reasons:
1 – Keeping all your money in one place makes it more simple and manageable.
2 – Having only one account reduces the amount of fees you’re paying.
A retirement rollover is the best way to move money from one account to another. It’s important to do so correctly to avoid fees. Check out this blog post for more information: How to Handle Retirement Rollovers Correctly.
Do you need to rebalance your investments?
Typically, the younger you are the more risk you can handle in your investments because you have more time to make up for any losses. The closer you get to retirement age, the more conservative you should be. Financial planning experts recommend that you rebalance your portfolio once or twice a year, but check up on it frequently to make sure you’re in line with your target.
Who are your beneficiaries?
How long ago did you open your retirement accounts? Are your parents still listed as your beneficiaries on your 401(k) from your first job? Or maybe an ex-spouse is still designated. Review your designated beneficiaries – it may be time for an update.
How much are you contributing to your retirement accounts?
You probably read about it weekly: Americans are not saving enough for retirement. At least contribute enough to meet your employer’s 401(k) match, if they offer it. Then aim to increase your contributions each time you get a pay raise, this way you won’t even miss the money.
Questions to Consider About Your Insurance Plans
Have you been putting off buying life insurance?
While many Americans admit life insurance is important, households are underinsured. People are telling themselves “It won’t happen to me,” meanwhile they really should be asking “What if?” Could your loved ones maintain their lifestyle if you died and your income was suddenly gone? Stop postponing and get a term life insurance quote today. Applying for life insurance online through Quotacy takes less time than it does to clean out the gutters.
When was the last time you reviewed how much your premiums cost?
It doesn’t hurt to get new quotes for your car, home, or life insurance policies. The costs of these policies have decreased over the past few years, so if you’re still paying premiums of policies you opened over five years ago, you might be able to save yourself some money by obtaining new quotes.
Have you had any recent major life changes?
Big life events mean you should review your current policies, especially your life insurance. Changes such as a new baby, a bigger home, or a new job may require additional coverage. A divorce or death in the family may require beneficiary changes. It’s recommended that you review your life insurance policies annually to ensure your wishes are carried through correctly when you die.
Whether all of those questions applied to you or just a handful of them… there’s no time like springtime to spring clean your finances and house.
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.