7 Actions for Financial Spring Cleaning

Spring is here and that means spring cleaning! This is the time where we pull stuff out of the closets, dust, organize, throw away and reprioritize the “stuff” that we have accumulated. When you’re done cleaning out your basements, closets, crawl spaces, and attics, how about taking some time for financial spring cleaning. Here’s how:

1. Inventory your bank accounts
Do you have too many bank accounts? Perhaps you opened an account to get a referral bonus, a loan, or it was convenient for a season. Look at all your banking accounts to see if they can be consolidated, especially if they are spread across multiple institutions for no reason. If these accounts have maintenance fees, you could be spending extra money. Consolidating will also simplify the job of keeping track of your accounts and make sure you’re finances are optimized for interest growth.

2. Inventory the credit cards
I’ve read somewhere that the average American carries 4 credit cards. No matter where you fall in the spectrum, take a look at your “plastic” to see if you are carrying cards you don’t need. Have you paid off a card but have not closed the account? Perhaps you don’t want to damage your FICO score by closing the card. If you have more than 1 card to close and are concerned with your score, you should not close them all at the same time, but you can set a schedule for cancellation dates. Schedule them 6 -12 months apart. Some cards carry annual fees, it doesn’t make sense to pay for a card you don’t plan on using. Also, the more open accounts you have, the greater risk that an error can exist. Which brings me to my next point…

3. Check your credit report
Federal law allows 1 copy of your credit report per year from the 3 bureaus: Equifax, Experian, and Transunion. To order your free copy go to AnnualCreditReport.com. There are other services with major advertising campaigns and catchy jingles, but they are not free – they will sign you up for a subscription credit monitoring service. The offical site is Annual Credit Report. If you have not looked at your credit report in over a year, spring cleaning is a great time! A large majority of credit reports contain errors. Also, the information between the 3 bureaus is often inconsistent. For this reason, I like to pull all 3 reports at once. Others, however, like to pull 1 free report every 4 months.

4. Review Insurance Policies
Financial spring cleaning is a great time to determine if you have too much, too little or the right type of insurance. Look over the car insurance, are you comfortable with the deductible? Do you have enough coverage? Could you get a better deal elsewhere? Also take a look at health / medical insurance to make sure you have the best plan to meet your needs. You may also want to look at life insurance policies, but if you’re satisfied with your current policy there probably isn’t much that would change.

5. Shred Old Financial Documents
Clear up space and get rid of clutter by shredding old financial documents. Here’s a breakdown of when it is safe to get rid of the documents:

• Tax documents (7 years)
• Quarterly earnings statements (1 year, but keep the annual statement)
• Bills (1 year)
• Pay check stubs (1 year)

See full list at BankRate.com

6. Review Will
To often, wills are created, stored and forgotten about until it is time for the execution of the will. But they are documents that should be kept current to reflect various life events such as marriage, divorce, child birth, or other various change in circumstances. Review your will to make sure it is still current and reflects your wishes.

7. Scrutinize your Investment Accounts
Rather it’s a retirement account or savings for college (such as 529 plan), make sure you know how your accounts are performing. Rebalance if necessary. This does not mean react to a single sub par performance. Instead, make sure your investments are diversified. The general rule of thumb is as you move closer to the target date, a larger percentage of your investments should shift to “safer” less aggressive alternatives.

What about you? Do you have some financial spring cleaning to do? (I know I do!) What else would you add to the list?

Tagged as: productivity