| | | | | | | |

Spring Cleaning Your Finances

“Spring cleaning your finances doesn’t have to be a daunting task. We’ve separated it into six categories (or rooms) to help simplify things for you.”


March 20 marks the first day of spring. If you’re like us Floridians, that means the end of our dry season and the beginning of rising temperatures. For just about everyone else in the country, Spring’s arrival means melting snow and sprouting greenery.

No matter where you live, the thought of spring cleaning is likely making its way onto your mental to-do list. But, what about spring cleaning your finances?

If you’re like me and you follow a “set it and forget it” type of financial plan, spring cleaning your finances is especially important. Organizing your finances once a year helps protect your wealth and assets. It will also help keep you from missing opportunities that can improve your financial situation.

A great way to approach the monstrous task of organizing your finances is to split it up according to areas of personal finances.

Think about it like splitting up your cleaning by the rooms in your house. Except, in this case, your finances are your house, and your financial house includes these six rooms:

  1. Budget
  2. Banking
  3. Debt
  4. Estate planning
  5. Investments
  6. Insurance

Follow the tips outlined below to clean up and organize each of your six financial rooms.

woman reviews her bank statements in order to complete an audit of her budget

AUDIT YOUR BUDGET

Think of your budget as the heart of the house. It’s the most important room because it sets the flow for the rest of your finances.

As the most important room in your financial house, your budget (if you have one) should be reviewed before you do anything else. If you don’t have a budget, this is the perfect time to start one.

Gather your bank statements for the last 6-12 months and complete the following steps to audit your budget. You’ll be left with a set of defined goals to follow moving forward.

Review your spending

Was your spending within your budget parameters? Did you spend more or less than you planned?

If you consistently went over budget in some areas, that’s a sign your budget needs to be adjusted. Hopefully, you underestimated other areas so that you can reallocate those funds to the areas that need them more. If you went over more than you were under, you should reconsider your spending habits.

Review your savings

Just like your spending, your savings should be reviewed throughout the year.

Have you been saving regularly or has it taken a back seat? Perhaps, you’ve saved more than you planned. If that’s the case, up your savings goals for the remainder of the year.

If you came under budget in your spending, consider allocating the extra funds to your savings.

Reevaluate your subscriptions

These days, there are subscription services for every facet of life. Television, clothing, pet supplies, beauty products – you name it!

How many subscriptions are you paying for? How many are you actually benefiting from?

Subscription services tend to be on the less expensive side, especially when you consider the convenience factor. But, how much are you really paying when you add up all those fees? Is it worth it? There’s no sense in continuing to pay for something you don’t need.

Assess your goals

Now that you have a better idea of your spending and savings habits you can determine your goals.

Keep in mind any large purchases or important life events you might have coming up. Your budget should take these into consideration.

woman speaks with her banker about consolidating her accounts

REVIEW YOUR BANK ACCOUNTS

Managing your bank accounts throughout the year can take a lot of time, especially if you’re juggling multiple accounts. Follow these steps to review your bank accounts now and you’ll save time later.

Consolidate accounts

There are several reasons why you might have more than one bank account.

Maybe you moved and wanted a bank closer to home, or you wanted to take advantage of a special sign on bonus.

Maybe you’re like me and use multiple accounts to manage your budget.

Having multiple accounts isn’t necessarily a bad thing. That’s unless you’re incurring fees every month or receiving an overwhelming amount of bank statements. If that’s the case, consider consolidating your accounts through a single bank.

Go paperless

If you haven’t opted-in for paperless statements yet you should. Not only does it cut down on paper clutter, but digital copies tend to be easier to sort, file and search.

Going paperless is especially useful if you have multiple bank accounts that you plan to keep.

Set up automatic bill pay

While paying your bills manually may give you a feeling of control, it wastes a lot of time. You also run the risk of missing a payment.

Make your life easier by setting up automatic bill pay.

Also, if you’re closing any of your bank accounts, remember to switch any automatic payments you have set up to the account you plan on keeping.

tackle your debt when spring cleaning your finances

TACKLE YOUR DEBT

Hopefully, your financial resolutions this year included paying off some, or maybe even all your debt. If that’s the case, now is a great time to check in on your progress and adjust your plan where necessary.

The budget audit will come in real handy here since it’ll give you a better idea of what you can spend.

Don’t have a plan for paying back your debt? No worries. This is a great opportunity to start one. Either way, follow these tips to organizing your debt payback.

Check your credit score

Did you know that federal law requires each of the three nationwide consumer credit reporting companies (Equifax, Experian, TransUnion) to give you a free credit report every 12 months?

You can do so on the federally-authorized site, annualcreditreport.com. There are several online tools, like CreditKarma, that provide a general barometer of where you are. Also, banks are starting to offer free credit reports monthly as an added bonus.

How ever you decide to do it, checking your credit report will help you pinpoint which debts are affecting your credit score the most.

It can also help you spot identity theft. Look out for suspicious activity or accounts you don’t recognize.

Pay off a big chunk right away

If you found a debt that’s really hurting your credit score, pay as much as you can afford towards it as soon as possible. Paying off a big chunk of debt right away is a small win that can help kick start your debt payback plan.

Devise a plan

We explain the Debt Snowball Method in our post about reaching financial resolutions. Put simply, it involves paying off your smallest debts first. This is a great option if you want to pay off your debts fast. It helps you build momentum because each time you pay off a debt is like a small win that motivates you to keep saving more.

Another option is to use the Stack Method. This involves paying the minimum payments on all your debt and throwing your extra funds to the debt with the highest interest rates. This way, you save the most money you can on interest payments; however, it could take longer.

person reviews investment documents

CHECK ON YOUR INVESTMENTS

Poking and prodding your investments too often is bad for your bottom line. Most financial experts will tell you that once, maybe twice, a year is all that you need. For those of you who, like me, love the “set it and forget” method, this is music to your ears.

So, how do you check on your investments? We recommend speaking with a financial advisor before making any changes to your investment portfolio; however, there are a few things you can do to prepare yourself for that conversation.

First, create a master list of all your investments (including retirement accounts) and then follow the steps below. You’ll minimize risk and optimize efficiency.

Rebalance Asset Allocation

From your master list of investments, determine your current asset allocation and then compare that to your desired asset allocation.

Is your stock to fixed income assets ratio where you’d like it to be? Is your retirement savings on track?

If not, there are a couple ways to rebalance the ratio.

The simplest way is to invest future dollars into the asset class you want to build up. This might take time, but it’s a lot less work than the alternative. The alternative – more hands-on and rapid approach – would be to sell and buy until you meet your desired ratio. A financial advisor can help you determine the right choice for you.

Consolidate accounts

If you’ve switched jobs, it’s likely you have leftover retirement accounts laying around. Move any old 401(k) accounts into the one at your current job or into a self-directed IRA.

Transferring all your accounts to one company will cut down on the number of statements you have to keep track of.

wedding couple holding hands

UPDATE YOUR INSURANCE

Insurance tends to be one of those things that you buy and then forget about until it comes time to renew. If you have automatic renewals set up, you might even ignore your policies for longer – maybe even until you need to file a claim.

While this seems like the easiest thing to do, you could be missing out on opportunities to save money. Even worse, you could be leaving yourself unprotected in certain situations.

Follow these steps to make sure your insurance policies are up to date and you’re not spending more than you should be.

Run new quotes

Insurance rates – whether they be auto, home or life – are constantly fluctuating. In fact, term life insurance rates have been on the decline in the last few years.

If you haven’t shopped around for a new policy in a while, this is the time to do it. You could save hundreds of dollars.

Update your policy coverage

Have you made significant upgrades to your house? Have you moved, gotten married or had kids?

It’s important to update your policies so that you’re sufficiently covered.

Ensure you’re covered with your life insurance policy by completing a life insurance checklist.

Update your beneficiaries

Check in on your life insurance policies. If you’ve had a major life event, like a divorce or the death of a loved one, you may need to make changes to your beneficiaries.

estate planning documents on a desk

UPDATE YOUR ESTATE PLANNING

The process of planning for your death is a grim subject, I know. But, it’s a necessary one.

After all, who else is in a better position to effectively survey and divide up your assets, except for you? And you’ve got to be alive and well to do it, so you might as well get it over with.

What better time to do that than during your financial spring cleaning?

Create or update your will

Do you have a will? If you’re married, have kids, bought a house or own a business, you probably should.

The good news is it’s really easy to create one. There’s a ton of tools online that can guide you through the process for free, or at least for really cheap. If you have a more complex situation, you may want to hire an attorney. Such services usually cost between $200 and $300.

Assign a power of attorney

Giving someone power of attorney (POA) allows them to act on your behalf for legal or financial matters. Depending on the type of POA, this person can handle your financial matters, make your healthcare decisions or care for you children.

You never know when an emergency will arise and a POA is needed. Choosing one now can help protect your wealth later.

A SIMPLE FORMULA FOR SUCCESS

While organizing your finances might seem like a daunting task, it’s a necessary part of protecting your wealth and assets. The good news is that it only needs to be done once or twice a year.

Your budget is the best place to start. From there you can visit each additional room in your financial house: banking, debt, investments, insurance and estate planning. Follow this simple formula and you’ll be sure to avoid missing any opportunities to improve your financial situation.