It's time for spring cleaning. So, clean up the garage, scrub the deck and wash the windows. And while you're at it, tidy up your cluttered financial life before the sloppiness costs you money.
Getting your financial life in order is all about knowing where you are and where you're going, says Lisa Featherngill, national director of wealth planning for Comerica Bank. "It's like taking everything out of your garage and seeing what you got," said Featherngill.
The purpose of reviewing financial documents like tax returns, savings and brokerage statements, wills and trusts and insurance policies? To junk what's not working and fix what needs fixing. You can also avoid leaving money on the table because key information is buried in a disorderly pile of paper.
We're not talking about what documents to keep and for how long. We're talking about cleaning up financial messes and avoiding future money miscues due to neglect.
Here's a six-point financial spring-cleaning checklist to boost your bottom line.
Upgrade Your Cash Yields
Start by taking a deep dive into your savings account statement.
The mess: Do you have a boatload of money earning zero interest that you didn't know about or were too lazy to put to better use?
The cleanup: Now's the time to take advantage of the higher interest rates financial institutions are paying on money markets and CDs. You can earn 5%-plus yields on six-month, 10-month and 12-month CDs, and find money markets that pay 5% interest, too, according to Bankrate.com. "Interest rates have gone up, savers may not be capitalizing on that," said Gina Bolvin, president of Bolvin Wealth Management Group.
Consolidate Far-Flung Accounts
Check your mail or email and count how many financial statements you're getting.
The mess: Do you have money sitting at seven, eight, or nine different banks and brokerages? If you do, it's likely these accounts are morphing into zombielike accounts. It's unlikely all those brokerage statements are talking to each other and that you know what you own. The downside: Your asset allocation is probably out of whack, and you might own a bunch of lagging assets.
The cleanup: Either consolidate multiple accounts into a single account or at least a small enough number so you can figure out what you own. You might discover you're overloaded in tech stocks or risky assets like bitcoin. You can also opt for an app like Mint that aggregates all your holdings in one place, says Featherngill.
Create Or Update Your Financial Plan
You have papers everywhere. But you may have no financial roadmap to get you where you want to go.
The mess: Your financial life is like a sports team with no game plan. Winging it only works for so long. Eventually, money-related mistakes and lack of a comprehensive strategy will lead to suboptimal financial results that make it harder for you to reach your financial goals.
The cleanup: "If you don't have a financial plan, get one," said Bolvin. A financial plan includes details about savings, spending, debt, cash flow, retirement savings, insurance, and a squeaky-clean estate plan.
Tend To Annual Basic Financial Chores
Just like leaves, financial messes aren't cleaned up without some sweat labor.
The mess: You've failed to do the basic blocking and tackling of personal finance. You might have missed the chance to trim your tax bill by selling a clunker stock and using the loss to offset gains. Your portfolio's asset mix, due to inertia, might be too risky and more geared to a 30-year-old than someone nearing retirement. You might be paying too much interest because your credit score and credit report is riddled with errors.
The cleanup: Don't just organize key documents. Review them. Scour your brokerage statement to see if it's optimizing returns and the asset allocation fits your risk profile. "You might need to make some adjustments," said Featherngill. Review your credit report for errors and signs of fraud. Do a line-by-line review of credit card charges to see where you're spending. (If there are charges for recurring subscriptions you no longer use, close them to save some cash.) Review your will and other estate planning documents to see if they're up to date. Analyze your tax return to see if you need to adjust your paycheck withholdings.
Clean Up Account Password Chaos
So many passwords. Too much to remember and forget.
The mess: Having more account passwords than you can handle. If you can't recall your password, you might not be able to access your account in time to make a trade or your loved ones might not be able to gain access to your accounts if you suddenly pass. "When something bad happens to you, people need to access your documents," Bolvin said.
The cleanup: Consider storing passwords with a password manager app. PC Magazine recently rolled out a list of its favorites for 2023, which include Bitwarden, which is free, Dashlane, and Keeper.
Safelock Your Estate
Trust documents and wills don't matter, until they do.
The mess: When looking through your paperwork, you realize important financial documents, such as wills, trusts, and beneficiary forms, have never been drawn up or updated. That spells trouble, especially if you've experienced major life changes recently. "We had a client that passed away and had a will but never signed it," said Bolvin.
The cleanup: "Check all your estate planning documents," said Featherngill. To avoid problems later, contact financial companies you have accounts with and make sure all your accounts have the proper beneficiary on record.
And not just primary beneficiaries. "Make sure you have contingent beneficiaries as well," says Eric Bond, a financial planner at Bond Wealth Management. Double check that your will is updated — and signed.
