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Spring Cleaning Your Finances

May 13, 2024

Each Spring, millions of Americans emerge from their winter hibernation only to find that the areas overlooked during the cold, dark winter months have become overgrown and cluttered. We clean up the gardens and garages to prepare them for full enjoyment as the sun extends the daylight hours. There might be a task that only occurs once or twice a year (batteries in the smoke detector?) but they are vital to our peace of mind for the next 6 or 12 months.

We should clean up our finances regularly as well. Spring cleaning is a perfect time to re-examine your financial health. There are a number of ways you can improve your financial situation. And like the battery replacement, without an annual reminder, you may never get around to assessing your financial health.

Check your Credit Report
A good starting point to assess your financial health is to check your credit report. It’s important to check for accuracy of information as well as any accounts that don’t belong to you. A study from the Federal Trade Commission reports that 1 in 5 Americans are likely to have errors in at least one of their credit reports.1 The number of complaints over credit report errors doubled from 2021 to 2023.2 You can request a free credit report from each of the three major credit bureaus - Equifax, Experian and TransUnion.

Clean Up Your Budget
Subscription services are more common today than ever. Review your bank and credit card statements.  Are there recurring charges that you don’t need? These not only include TV and movies but meal prep, music, news, and other services that could be eating your precious savings each month. Review your spending habits because you may be able to improve efficiencies in your expenditures. Check in on your financial goals and ensure you have enough room in the budget to meet them.

Address Your Debt
It’s no secret interest rates increased over the past year. This has put pressure on any budget paying interest. Unsecured debt, such as credit cards, can see interest rates over 20%. This interest takes dollars away from savings or other financial goals. If you have multiple loans from different vendors, you may benefit from loan consolidation. If you’re struggling to pay down credit card debt, a balance transfer may offer temporary reprieve from high interest payments.

Clean Up the Clutter
Financial clutter can overwhelm us. We are bombarded with documents every year. Knowing what you should keep and what you can recycle can help keep your financial records in good order. The IRS statute of limitations for auditing is 3 years. However, certain circumstances allow the audit to go back 7 years so you should keep your tax returns and supporting documentation for 7 years. Other documents may be tossed after 1 year. Documents that fall into this category include bank and credit card statements, paystubs and utility bills. Many banks and financial institutions offer electronic records, allowing for easy access to old records. Click here to download our Record Retention form that recommends retention time periods for a variety of documents.

Review your Estate Plan
Are your wishes written down and updated? Have you had your Will, Power of Attorney, Healthcare Proxy, and if applicable your Living Trust reviewed recently? Do your loved ones know where to look and who to contact in case of an emergency? Without the proper legal documents, the state could be in charge of distributing your property which can leave your loved ones to deal with lengthy legal disputes. Discussing these matters with the individuals named in your documents can eliminate surprise and confusion. Also, estate laws can change so it’s important to review these matters regularly. Review and ensure your beneficiary designations are updated.

Having this annual financial review will provide you peace of mind and ensure that you are on track to accomplish your goals. Contact your financial advisor to begin your financial review today.