Spring Cleaning Your Finances

In the season of cleaning, have you stopped to think about doing a spring cleaning on your finances? Whether you do it in the springtime or choose another time of the year, an annual review and checkup of your finances is critical to keeping your financial life in shape.

Where do you start? Get it all out on the table. Gather statements and documents of savings accounts, loan obligations, investment information, and any other accounts which are designed to help you protect your finances and lifestyle

(i.e. insurance, health directives, any wills or estate planning tools). Sort it. Make a pile of where you have money saved, where you owe money, and what you have in place to keep yourself protected. Review it. Roll up your sleeves; this is where the work is. Since it is literally “all out on the table” it is the best time to go through and see what you’ve got going on. If you are prone not to really take an active interest in your finances, this is a good point to see where you can streamline and potentially simplify it all.

Have an old savings account that’s collecting dust (or worse, inactivity fees)? Make a plan to close it out and move the money to an account you use regularly. Have an old store credit card account you haven’t used in ages? Consider closing it out in order to have one less open line of credit.

Take out your auto, health, and life insurance papers and see if your current coverages still meet your needs. You may find yourself under or over insured in some areas. Also take a look at any account beneficiaries or vital contact information with your paperwork. Make a plan to update those as well.

Prioritize

We all have financial goals, whether we actively work towards them and monitor our progress or not. Perhaps after your clean out you realize you’d like to pay down debt in the coming year. Maybe it’s bulking up your savings account or something like taking more of an active role in your retirement savings or investments.

It might be something as simple as doing something with that old 401(k) account that’s been collecting dust from two job moves ago. In all likelihood, you are going to find areas of “lazy money”—where your money isn’t working as efficiently as possible for you. It’s time to pull together a plan.

Creating a Financial Plan

Unless you very actively manage your financial life, chances are you’re finding a few things which surprise you, or at the very least you’d like to improve upon. Draft a financial plan which covers your savings, debts, re- tirement, and insurance needs. A good financial plan encompasses:

• Defining your financial goals— What do you want out of life and how can your money help you get there? Write down what it is you’d like to have out of your financial life. Goals can be short, mid, and long term in nature. Write them all down.

• Your current money situation— Once you have a handle on the inflow and outflow of your money, can your current money situation support your financial goals? How can you bridge the gap between the two? If you see any bad patterns in your spending or saving, add a solution to your goals list.

• A plan with benchmarks—Looking at what you want versus what you’ve got will expose some areas that you need to work on now. Are you making some money mistakes such as paying a high interest rate on loans or credit cards? Are you not paying yourself first by putting money aside in a savings account? Pull together a plan with benchmarks and a timeline to get you working towards those goals.

• Assess your risk—Do you have areas where you are exposed to risk? Are your investments appropriately diversified or invested in stocks compatible with your comfort level? Do you need more life insurance? A better handle on what you’re setting aside for retirement? Do you have a health directive or will in the event something should happen to you? Now is the time to evaluate and plan.

After you’ve dusted off all the paperwork and you’ve got a plan, put it in motion! Revisit and revamp it as needed in the coming months to keep yourself on track as your goals evolve. Getting your financial life organized and committing to a plan is worth the time and effort involved. D