I love springtime! The weather is perfect, the days are getting longer, and there’s green everywhere. More importantly, the fish are starting to bite more actively… haha.
We seem to be turning the curve with COVID-19 which is fantastic. However, a lot of us are still home waiting for more widespread immunity. What else could you do in the meantime?
How about some good ole fashioned Spring Cleaning. Do you do it? How about adding some money to the mix!?
Yup! I’m encouraging a little Financial Spring Cleaning right about now. It’s a great time to review our finances and get our financial house in order.
But don’t worry, it doesn’t need to be boring.
Financial Spring Cleaning Checklist
First of all, let’s not make financial spring cleaning into a chore. Consider it an opportunity to make things more efficient and lighter. I think life’s best things are simple.
Your finances should be simple as well in order to increase your likelihood of managing it effectively. The less you have to manage, the more time you have back for things that matter most (i.e. family, friends, etc.)
Here’s a quick financial spring cleaning list of some tasks/todos that will have a positive impact on your personal finances:
1. Review Your Financial Accounts
One area of review is taking an inventory of all of your financial accounts. This can be accomplished in a few different ways, but I like to use Personal Capital to consolidate all of our accounts into a single view. Alternatives include using your bank’s website, Mint.com, etc.
Once you have this comprehensive list, consider if any accounts are extraneous, or inefficient. It’s easy to have different accounts lying around after many years, or even when you consolidate your finances with a spouse. But, don’t let the clutter blindside you. You may have fees you’re paying that you don’t need to, or you may be able to consolidate some bank accounts to gain additional benefits.
If you find credit cards you don’t use, don’t cancel them. It’s best to just put them away in a draw out of sight because canceling them could impact your credit score (in a bad way).
Finally, if you’d like to take it one step further, consider creating a money map to get a comprehensive view of your personal finances.
2. Put Your Stimulus to Work!
If you received a stimulus (or are expecting another), take this time to put some or all of that money to work. Best uses include:
- Paying for outstanding debt (highest interest notes first)
- Creating an emergency fund (if you don’t already have one – I personally like an entire year’s worth of expenses, but you can likely get by on 3 months worth)
- Investing in your 401K, 403B, or Roth IRA – I won’t get into all the details here, but if you have the ability to contribute to a tax advantage account, or receive a match from an employer, it’s time to get a piece of your pie! All too often I would see my former employees ignore free money – don’t be like the masses… make your move!
What I would NOT suggest is using this newfound money to purchase unneeded “stuff”. If you really have excess $$ from the refund, then fine… use up to 15% of it, if it makes sense.
We are using our next stimulus check to pay for real estate rental furnishings.
3. Organize Your Financial Documents
Getting your financial documents in order can save you countless hours of wasted time sorting and looking for documents. In fact, I wrote an entire post about organizing your financial documents here – How to Knockout Financial Clutter For Good, but it bears repeating and will save you A LOT of time over the entire year.
Also, don’t forget to get rid of unnecessary documents you no longer need. Here’s a quick reference on how long to keep financial records. (This, of course, may be different in other countries outside of the U.S.).
With that said, a lot of companies are already forcing you to go paperless. This is great for the environment, however, don’t forget to look at your statements! I know I’ve been guilty of this too. And, when I remember to review them, I’m always thankful because I have a better picture of what I spent, how I performed, etc.
4. Review Your Portfolio Allocation
If you already have a stock or fund portfolio (IRA, 401K, 403B, etc.), you should consider reviewing your asset allocation.
Check out Sam’s article from Financial Samurai here on – The Proper Asset Allocation of Stocks and Bonds By Age.
5. Review Your Overall Asset Allocation
If you are further along in your wealth-building, don’t forget to review your Overall Asset Allocation.
If you’ve read my blog for a while, you’ll see that I have a bias towards real estate as an investment class. But, everyone is different. Just make sure your current assets are distributed according to your own comfort with risk.
6. Review Your Credit Score
Here’s a simple, but often overlooked one. Take time to review your credit score and ensure it looks accurate. The worst thing is to not pay attention to this important score and find out after the fact that your identity has been compromised, or that there is a reporting error and your credit score is “messed up”.
Your credit scores ultimately determine your likelihood of receiving financing, and/or the rates you will get charged. Don’t be fooled. A half of a point (0.5%) on a mortgage can mean a huge difference over the life of the loan.
Want to take it one step further? Learn how I maintain an 800+ credit score consistently using free tools on the Internet.
7. Review Your Insurance
Okay, so this one may be a bit tedious, but it’s well worth the time and effort to address it. Insurance is a huge component of building a strong “financial house”.
What changes have happened recently? Has your family grown? What would happen if an “unexpected” event struck? Would your family be protected, and to what extent?
I typically will review auto policies, life policies, casualty, and healthcare around this time.
My friend recently turned me on to a new site (LEMONADE) that will give you a quote FAST. And it has a great user interface.
8. Update Your Budget
Finally, if you don’t already have a budget, this should be the year you GET ONE! Not sure how to go about doing it? I’ll break it down for you step by step… and even show you the “easy” way!
Remember to pay attention to recurring services or subscriptions you have… those can add up quickly!
9. Ask For a Raise (or, Prepare For One)
Saving a large percentage of your income is much easier to do when you have a larger income. So, I like to focus on this end of the equation when I’m able to.
If you have a mid-year review (or whenever it may be)… the time to prepare is now! Show your employer your value by standing out from the crowd. If you own your own business, provide a service or product that is better than your competitors.
The rewards are distributed disproportionately at the top, so shoot for rock star status! The truth is it’s not that hard to perform when most people are content to settle. Don’t follow the crowd. Become a leader and you WILL command a premium.
I wouldn’t try tackling all of these at once. Rather, focus on getting a specific one completed before moving onto the next.
And, I would try to tackle as many as you can before the season changes yet again (if you don’t set a deadline, it likely won’t get done!).
Not only will you feel great when you get through this financial spring cleaning checklist, but your finances will also thank you too!
The financial results that we desire are always controlled by our actions. Let’s use the Spring to our advantage.
Readers, what other financial spring cleaning tasks could you do? Which ones listed would be the most impactful for you this year?
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