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Five Steps to Spring Clean Your Finances

Spring cleaning isn’t just for opening windows and decluttering your spaces! Find ways to breathe new life into your finances by reviewing what works and developing simpler processes for what doesn’t work in our latest article.

As spring quickly approaches, you may be excited to delve into freshening up your home, but have you ever considered spring cleaning your finances? This is the perfect time of year to review your spending habits and simplify your finances. Read on to learn five steps you can take to clean up your finances this spring.

Step One: Sort through financial paperwork.

Do you have tax documents, paper statements from your credit union or bank, or other financial paperwork buried in your junk drawer? If so, now’s the time to organize it! Determine what you need to keep and what you need to get rid of in order to effectively organize your paperwork. Read on to learn what belongs in the keep pile.

• Important documents like birth certificates, death certificates, marriage certificates, divorce decrees, Social Security cards, passports, military discharge papers, adoption paperwork, legal documents, and wills and estate documents should be kept forever.
• Homeowners should keep their property deed, home inspection and warranty documents, mortgage documents, and receipts for major home improvements and purchases that prove you improved the value of the home forever. Although, if you pay off your mortgage, you may choose to shred your mortgage documents and keep the record of the paid-off mortgage instead.
• Tax documents like Forms W-2 and 1099, credit union or bank statements and brokerage statements used for tax purposes, tuition payments, charitable donation receipts, employment records, and any other documents that verify information on your tax return should be saved three to seven years. Read more about what the Internal Revenue Service (IRS) recommends here and here.
• Records of sold investments and medical records should be kept for seven years.
• Credit union or bank statements, credit card statements, quarterly investment statements, receipts for large purchases, canceled checks, paid medical bills, and pay stubs should be kept for a year.
• Utility bills and deposits and withdrawal records should be kept for a month or less. If you’re self-employed, you may need to keep utility, cable, and cell phone bills for tax purposes. If you are not self-employed these documents can be shredded after you verify your payment was processed. Warranty information, insurance documents, vehicle titles and loan documents, pension records and retirement plans should be kept as long as you own them.

After creating your keep pile, you may be wondering where to store your documents. You can keep physical documents in a fire-proof safe or safety deposit box. For important digital records, ensure your documents are archived and backed up, as well as password protected. For documents you are getting rid of, be sure to shred them. A cross-cut shredder is one way to dispose of your financial documents and personal information. You could also engage in a community shred day to properly destroy them.

Step Two: Review your spending habits.

Set aside time to go through your credit union and bank statements to review your purchases. First, make sure all the items are accurate and there was not any fraudulent activity that occurred. Second, take note of how much you spent in different spending categories like eating out, clothing, books, transportation, entertainment, etc. Are there any places you want to adjust your spending? Are there any subscriptions or streaming services you forgot to cancel? After reviewing your spending, consider reworking your budget to accommodate any changes you want to make and match up with how you plan to spend moving forward.

Step Three: Check your credit.

Visit AnnualCreditReport.com to request your credit report from each of the three credit bureaus. Check to make sure there is no fraudulent activity on your credit report. Is there anything you are hoping to improve on your credit report? Are you carrying a balance on your credit card above 30% of your balance limit? Are there items you need to have removed from your credit report? Once you are done checking your credit report and noting any follow-up items, consider locking your credit reports until you are ready to review them again next year.

Step Four: Explore retirement accounts.

Login to your retirement accounts and review the amounts in each. Use a retirement calculator to determine if you’re on track to retire when you would like to and if you’ll have enough saved at that time. Are there any other retirement savings options you would like to pursue? If you have a 401k, are you receiving a full match from your employer? Would you like to open an individual retirement account (IRA) if you haven’t already? Take the steps you need to take now so you are better prepared for retirement.

Step Five: Prepare for the remainder of the year.

Use what you have learned while spring cleaning your finances to get ready for the rest of the year. As you spring clean, look for ways to make managing your money simpler. Consider these questions when trying to identify ways you could simplify your finances:

• Do I want to try budgeting digitally instead of with paper and pencil?
• Do I want to switch to electronic credit union or bank statements from paper statements?
• Am I enrolled in automatic bill payments?
• Am I automatically transferring funds to savings when I get paid?
• Am I interested in setting up eAlerts so I can easily keep track of large purchases and account balances?
• Do I need to save now to prepare for a vacation, a home improvement project, or holiday gifts later in the year?
• Do I need to complete my FAFSA for the next academic year to qualify for student loans and financial aid?
• What steps can I take now to effectively prepare my finances for the rest of the year?

Once you’ve determined how you can simplify your finances, take action! Go into a branch, call or message your financial institution, or set up a meeting with a financial advisor or financial aid representative to set yourself up for success for the remainder of the year.

Sources:

https://www.cbsnews.com/video/expert-on-essential-tips-for-a-financial-spring-cleaning/

https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records#:~:text=Keep%20records%20for%203%20years%20from%20the%20date%20you%20filed,securities%20or%20bad%20debt%20deduction

https://bettermoneyhabits.bankofamerica.com/en/privacy-security/how-long-to-keep-documents-before-shredding

https://aplusfcu.org/blog/keep-or-toss-how-long-should-i-hang-onto-my-financial-documents#:~:text=Keep%20For%20Seven%20Years&text=This%20category%20includes%20all%20supporting,to%20audit%20a%20tax%20return

https://www.irs.gov/businesses/small-businesses-self-employed/what-kind-of-records-should-i-keep#:~:text=Supporting%20documents%20include%20sales%20slips,and%20on%20your%20tax%20return

https://www.annualcreditreport.com/requestReport/landingPage.action

https://www.nerdwallet.com/calculator/retirement-calculator