The days are longer and the temperatures are warmer – so it must be spring. For many of us, that means it’s time for some spring cleaning. But why stop with sprucing up your living space? This year, consider extending the “spring cleaning” concept to your finances as well.
How can you tidy your finances? Here are some suggestions:
“De-clutter” your portfolio
As you go through your home during your spring cleaning rounds, you may notice that you've acquired a lot of duplicate objects – do you really need five mops? – or at least some things you can no longer use, like a computer that hasn’t worked for years. You can create some valuable space by getting rid of these items. And the same principle can apply to your investment portfolio, because over the years you may well have acquired duplicate investments that aren’t really helping you move toward your goals. You may also own some investments, which, while initially fitting into your overall strategy, no longer do so. You could be better off by selling your “redundant” investments and using the proceeds to purchase new ones that will provide more value.
Get organized
During your spring cleaning, one of your key goals may be to get organized. So you might want to rearrange the tools in your garage or establish a new filing system in your home office. Proper organization is also important to investors – and it goes beyond having your brokerage statements in nice neat piles.
For example, you may have established IRAs with different financial services companies. By moving them to one provider, you may save some fees and reduce your paperwork, but, more important, you may find that such a move actually helps you better manage your investments. You’ll know exactly where your money is going, and it could be easier to follow a single investment strategy. Also, with all your IRAs in one place, it will be much easier for you to manage the required minimum distributions you must start taking when you turn 70-1/2. (These distributions are not required for Roth IRAs.)
Protect your family’s financial future
When cleaning up this spring, you may notice areas of concern around protecting your home – perhaps there’s a crack in your window, or your fence is damaged or part of your chimney is crumbling. Your financial independence – and that of your family – also needs protection. Is your life insurance sufficient to pay for your mortgage, college for your kids, and perhaps some retirement funds for your spouse? Do you have disability insurance that can provide you with some income if you become ill or injured and can’t work for a while? Have you considered the high costs of long-term care, such as an extended nursing home stay? A financial professional can help you determine if your insurance coverage is adequate for all these needs and if you're paying too much.
Look for recurring expenses
Each year it seems like most of us are always signing up for at least one subscription based service. Log in to your bank account and browse through your statement. Do you see any recurring expenses that you no longer have a need for? If you do, then make sure you cancel them because that is money right back in your pocket.
Knock out your debt
If you have found yourself struggling with debt, then now is the perfect time to start working towards eliminating it. If you need a little help getting started with the process, take a look at The Avalanche Method. With this, you will prioritize your debts by their interest rate. Start by paying off the debt that has the highest rate and then move on to the next highest debt until you are debt-free.
Another popular method is The Snowball Method, where you will start with the debt with the lowest balance and move on to the next highest balance until everything is paid off.
Start your tax planning for next year
Don’t wait until the end of the year to start planning for next year’s taxes. If you are a company driver that receives a W-2 make sure that your W-4 form is up to date. If you get married or have kids then your allowances will have changed. This is also a good time to start making charitable donations, which will help lower your taxable income.
Consider putting these spring cleaning suggestions to work. They may help you keep your financial house in good shape for all the seasons yet to arrive.
This article was written by Edward Jones for use by Greg Hall, Financial Advisor with Edward Jones. He can be contacted via email at greg.hall@edwardjones.com or via phone at 303-985-0045.