Every time a season changes, there are thoughts and plans to change things in your life. Clean the house, the yard, or start something new. Perhaps a new start you can consider this season is spring cleaning your finances. Here are some steps:
Finances can attract clutter with statements, contracts, notices and more. Having a filing system – paper, electronic or combination – simplifies your life and will help if others take over your financial tracking. Store them in secure places – safe deposit boxes, fireproof safes and digitally encrypted files.
Getting rid of paper is low-hanging fruit as you move to be more efficient. Main advantages include ease of storing and retrieving and security. Make a list of your accounts and passwords, store the physical and digital copies in safe places, and inform your wingman of their locations.
Re-tune the budget
If you are among the 59 percent of Americans who enjoy saving money more than spending it, this section is for you. Continue to switch to better deals from online FDIC insured money markets, consider cutting the cable (maybe even Amazon Prime and Netflix) and reviewing home and car insurance payments. Also, business owners can reduce financing charges by moving from monthly to annual payment for insurance, software and more. Finally, review and adjust tax withholdings and payments.
Fix your debt
We’ve previously talked about the importance of eliminating credit card and student loan debt, and while important, today we’re discussing house “debt.” Dave Ramsey refers to being mortgage free as the new status symbol. It may make sense to own one of our largest assets (house) free of debt. Those driven to pay off the house can synthetically create a 15-year mortgage out of a 30-year mortgage by making extra payments and reduce the total interest paid by half – while still having the flexibility to fall back to the lower 30-year payment if you hit a rough spot financially.
Anticipate life changes
Best ways to reduce stress include exercise, plenty of sleep and having a written financial plan. Prepare for the major expenses and shifts that lie ahead including: replacing a vehicle, changing homes, having a kid, funding education and retirement. Then consider the risks that can set you back – long-term sickness or disability, death of a breadwinner or assisted living. Can you self-insure (have plenty of assets) or should you consider expanding your insurance?
Mind your retirement accounts
Make sure you’re saving enough to maintain your desired lifestyle in retirement. IRS limits on IRAs, 401(k)s and others increased a little – and there’s no limit on what you save after-taxes. If you don’t already, enroll to qualify for the free employer match. Say the company will match your contributions up to five percent, contribute five percent and their match has automatically doubled your savings. Then gradually increase your contribution rate annually until you hit the maximum. Check your investments. If you didn’t like what happened during the final quarter of 2018, then adjust before it gets worse, or better yet, get a good dose of confidence from your financial advisor.
Secure your future wisely.