Spring is in the air and it’s time to clean up the house but don’t forget to clean up your finances while you are at it. You probably reviewed your finances over the last few months to prepare your tax return. Now, it’s time to get organized, purge documents, review your budget, and take on other tasks to help you stay on track for the remainder of the year. Here are some of the key items to undertake:
- Review tax-related paperwork. Generally, you should keep tax returns and important documents for 7 years in case of an audit. Other documents may need to be kept for longer periods, such as records relating to the purchase and sale of your house or other property and capital improvements. When in doubt, ask your accountant.
- Scan documents. Hard copies take up significant physical space in your home and can be lost in a fire or natural disaster. Many documents can be scanned and stored digitally. Items that must be kept as originals should be secured in a fire-safe box.
- Shred old documents. Once you determine what you must keep, you can purge the rest. However, make sure to shred and dispose of them properly.
- Back up files. Ideally, you should have a service that will automatically back up your digital files to a secure cloud daily. I also recommend backing up your files on an external hard drive.
- Get your credit report. You can obtain a free credit report annually from each of the three main credit bureaus – Equifax, Experian, and TransUnion by visiting AnnualCreditReport.com. Request a report from one of the companies every four months to monitor your credit report throughout the year. In some cases, you may be entitled to additional free reports. See the Consumer Financial Protection Bureau website for more information.
- Assess your finances year-to-date. Ideally, you created a budget and set goals at the beginning of the year but even if you didn’t, you should review your income and expenses and determine whether you should make any changes. Did you get hit with an unexpected bill? Are you on track to pay down your debt or save for a house or retirement? If not, what can you do to turn things around? It’s also a good time to look at your investments and asset allocation.
- Address your debt. If you have significant debt, it is important to develop a comprehensive plan to reduce it. That may include cutting expenses drastically, seeking a second job, taking out a personal loan, changing credit cards, negotiating with creditors, or other options.
- Revisit your plans with advisors. Depending on how your year is going, you may want to consult with your accountant, attorney, financial planner, or money manager to discuss financial, tax, and/or legal issues that may affect you this year.
These are just a few suggestions for your spring cleaning. Your “house” may benefit from focusing on other tasks. The important point to remember is to pay attention to your finances throughout the year, so you can make adjustments as needed and minimize unpleasant financial surprises.
Contact us for a free consultation if you need help with your financial spring cleaning.