As you deep clean your home, there’s another area that likely needs sprucing up: your personal finances. After all, spring is also when you might find yourself knee-deep in paperwork.
“Tax season is the New Year of the finance world, so look at it as a fresh start to get your finances on track,” says Jim Pendergast, senior vice president and general manager at altLine, an arm of the Southern Bank Company.
Now that you’ve hunted down receipts, downloaded statements, and filed your taxes, it’s time for a financial refresh.
1. Declutter digital and tangible items.
Some spring cleaning tasks may overlap with your personal finances.
- Remove unwanted or unused items. If you have clothing that doesn’t fit or an armoire that doesn’t suit your taste anymore, now is a good time to clear it out. “If any of the items have any resale value, post them on Craigslist or Facebook Marketplace,” recommends Rachael Burns, a fee-only Certified Financial Planner based in Northern California. “Donate any remaining items and save the receipt to take a charitable deduction on your taxes.”
- Scan and recycle paper. “Clean up (and out!) your paperwork files,” recommends John Bergquist, managing member of Lift Financial in South Jordan, Utah. “Keep only the most important paperwork, scan those documents into a digital format, and get rid of all the junk.” Make sure to shred documents that contain account numbers or any other sensitive information. Worried you’ll get rid of something you might need? In most scenarios, tax-related documents only need to be kept for three years, according to the IRS. And most financial statements are available online.
- Take steps to reduce junk mail. Stop unnecessary new paper from entering your home. “Visit Optoutprescreen.com to opt out of receiving pre-approved credit or insurance offers in the mail,” recommends Burns. Remove digital clutter too: “Go through your email inbox and unsubscribe from any shopping sites that may tempt you to spend,” Burns says.
2. Find sneaky spending.
“Set it and forget it” is a great strategy when it comes to paying bills and making investments, but automatic renewals can be a budget-buster. “Carefully comb through your debit and credit card activity for forgotten subscriptions or other services you're no longer in need of,” Burns says. You may find that you can cut a streaming service (or several) or nix a monthly gym membership.
3. Assess budget and financial goals.
Give your overall accounts and budget a review. Both your earnings and spending habits may have shifted. Make sure your budget reflects that. If you don’t have a budget in place, now’s a great time to set one up.
Take a moment to check in on your big-picture, long-term financial goals, too, Bergquist says. As with your budget, this is a moment to assess what’s working and what’s not. Ask yourself if you’re still on track, and what may need tweaking.
4. Automate bill payments.
Late payments are the most common reason for credit score dings, says Rod Griffin, senior director of public education and advocacy for Experian. If you’re often late with payments or rely on sticky notes to remind yourself, consider automating them, he says.
If your income is variable or automating payments doesn’t work for other reasons, try adding repeating reminders to your calendar to jog your memory.
5. Check your credit score—then freeze it.
For good financial health, check your credit score regularly, says Griffin. This will help you know where you stand before making a big decision, such as buying a car or house, and also help you catch identity fraud.
When you’re done, freeze your credit. A credit freeze blocks access to your credit report, which means lenders cannot access your report without you temporarily or permanently lifting the freeze. This won’t stop thieves from making false charges on your existing cards, but it can prevent someone from opening a credit account in your name without your permission, Griffin says.
6. Consolidate retirement accounts.
Do you have several retirement accounts at multiple financial institutions? If so, you’re not alone. Start by listing out all of your retirement accounts. Then, roll them into your current employer’s 401 (k) program or combine them into an IRA.
“Fewer accounts means less to track, which is particularly helpful when you need to begin taking distributions,” Burns says. Plus, having all the funds in one place makes it easier to get an at-a-glance sense of how much money you’ve saved toward retirement.
7. Open advantageous new accounts.
New accounts can also benefit your overall financial picture. Open a 529 college savings account if there’s a future student in your life, recommends Gift of College Inc. chief operating officer Patricia Roberts. “What's great about 529 college savings accounts is that earnings are not taxed as the account grows in value, and no tax is ever owed on those earnings when funds are withdrawn to cover a wide range of higher education expenses,” Roberts says.
Plus, depending on where you live, you may get a state tax deduction or credit for contributing to a 529 account. That means if you put money in the account this year, you’ll owe less in taxes next year, Roberts says. More importantly: “[Your] loved ones will have more money to pursue their educational dreams when the time comes,” she says.
8. Pay off a small debt.
Expecting a tax refund? Consider using the money to pay off a small debt first.
“While conventional wisdom is to prioritize paying down your highest interest rate debt, sometimes the sense of accomplishment that comes from wiping out your smallest balances will motivate you to tackle your higher balances,” Burns says.
9. Update your beneficiaries.
“If the pandemic taught us one thing it's that life is uncertain and you never know what might happen,” Bergquist says. Look at your accounts and make sure you have the correct beneficiaries in place. If you’ve welcomed a new family member, updates may be in order.
10. Review your insurance coverage.
Make sure you have the right life insurance. “One rule of thumb is to have 10- to 20-times your income in total insurance and/or assets,” Bergquist says.
Other insurance may also need updating. “Your homeowners insurance might need to be adjusted up for the higher value and cost to build a home,” Bergquist recommends.