Spring Clean Your Finances: 7 Steps to Get Your Finances in Shape
Spring often prompts us to get rid of some of the old stuff that’s lying around. Many of us will take on projects such as cleaning out the garage, scrubbing the fridge, or de-cluttering closets. While you’re in the cleaning mood, take some time to clean up your finances. It’s a great time of year to perform an annual evaluation and tidy up your budget, bank accounts, debts, and investments. Here are seven tips to help get you started.
1. Take a look at your debt
Figure out how much you owe and how much you’re paying your lenders in interest. Once you know that, do some comparison shopping on what you’re paying, compared to what’s available. According to Times, that can prompt you to consider refinancing your mortgage or even ask your credit card company for a lower interest rate.
2. Make a dent in your debt
“The question has always been whether you should start paying off the balance with the highest interest or knock out the smallest bills first,” writes Times. But, actually, researchers have found that people are more motivated to continue with a debt-reduction plan if they get rid of small debts entirely first. That will then (hopefully) give you the momentum to keep plugging away at your larger debt too.
3. Create an ICE folder
If you are in charge of the family finances, this is a great fall-back in case something were to happen to you. Consider your ICE, or “In Case of Emergency,” folder to be the place where you keep all of your account numbers, login IDs and passwords, a list of bills you pay each month, investment and retirement fund information, and anything else that would need to be handled in your absence, Forbes writes. If someone else in the family is in charge of finances, ask them to take a little time to create an ICE folder for you. It’s not a pleasant topic, but it could make things a lot easier if an emergency were to occur.
4. Turn your thoughts to retirement
While you’re going through your finances, it’s the perfect time to consolidate some of your retirement accounts, rebalance them and update beneficiaries, Bankrate writes. Reviewing any accounts you can consolidate is a great way to cut down on all of the details and account information you have running through your mind.
5. Go electronic
Do you have stacks of papers in your home office? If so, this task is for you. Almost everything, such as statements, paycheck records, and even tax paperwork, is now online, meaning there’s no reason to have piles of credit card statements and bills. According to U.S. News, just make sure you have access to all of the electronic documents and that you know all the passwords. If you insist on sticking with paper statements, then try this to help eliminate some of the piles: Once your first-quarter account statement arrives, shred the monthly statements that you have for January and February.
6. Do some estate planning
Set aside some time to create or update a will or trust, consider a living will and financial power of attorney, and toss out old documents, Bankrate suggests. There are even do-it-yourself programs out there, such as WillMaker or Will Creator, that can help you create a simple will for as little as $20. While this may be at the bottom of your to-do list, take an hour or two to get it done. It isn’t hard, and it’s good to know that you have a will in place, should anything happen to you.
7. Tally up rewards
Many of the rewards programs you’re in will most likely have expiration dates. Organize your credit card points, airline frequent flyer miles, and any other rewards programs you participate in. “Go through your various loyalty club memberships, so you can use your rewards before you lose them. If you have to pay a fee to participate (through a credit card’s annual fee, for example), calculate whether the value of the rewards offsets that amount,” Times said.