8 ways to spring clean your financesSubmitted by Retirement Choices of California on May 31st, 2019
You’ve filed your taxes, and now it’s time to make good on your promise to “spring clean” your finances. One key task is to throw away – or shred – old bank and credit card statements and aging tax returns that no longer give you joy. But there are other steps you can take to buff up your finances.
Starting by analyzing. Spring is the perfect time to ask a CPA or certified financial planner to review your tax return, especially last year’s net after-tax income sources. Determine your top marginal tax rate under the new tax laws and rates and see if some of your income may be better off as tax-free, long-term capital gains, or qualified dividends versus ordinary income, or vice versa. Many people will find that their income-producing investments may need to be changed accordingly. For instance, a lower tax bracket could call for more ordinary income such as IRA distributions, while a higher tax rate could call for more tax-free income and fewer IRA distributions. Also, if you received a refund on your tax return, contribute the proceeds into an IRA or Roth IRA. Most tax software makes it easy to do and this is a great habit to do each year. Another option would be to use the proceeds to fund a child's 529.
Consolidate, close financial accounts
Prepare a list of your financial accounts – IRAs, Roth IRAs, 401(k)s, taxable accounts and health savings accounts. The objective is to consolidate similar accounts, IRAs for example, to a minimum number of custodians.
Doing this, especially with your retirement accounts, can help you lower the fees you pay and make it easier when you have to take required minimum distributions or RMDs after age 70½ on your IRAs. A consolidated approach to investing will help to provide a more streamlined approach to your money management approach.
Check your debts
Get a handle on your debts, how much interest you’re paying, and when payments are due, says Sarah Carlson, the founder of Fulcrum Financial Group. Search for ways to reduce the interest rate you pay on loans, credit cards and the like; consolidate debt if it makes financial sense, put in place a system to avoid late payments.
Review automated payments
A growing number of people now have recurring payments that are automatically deducted from financial accounts. Review those payments, canceling those for products and services that are no longer used – such as gym memberships. Apps such as Truebill and Trim App help you find and eliminate subscriptions.
Check your cable, cellphone bills
Your cellphone is one service that escalates over the years and is never second-guessed. That 12-month free trial that hooked you five years ago is now full price and then some.
We recommend documenting all your accounts, bills, and service provider contact information. You and your loved ones will be happy to have all important information together if there is an emergency or someone passes away. "The Family Information Organizer: Your Planner for any Emergency, Disaster, or Loss of a Loved One" is a free eBook that you can use.
Check your insurance plans
Review your auto, life, home and umbrella insurance policies to make sure you’re getting the most competitive rates. If you have good students enrolled in your plan, be sure to ask about special rates for children with good grades.
Be digital savvy
Cybersecurity is a critical area for your financial “spring cleaning.” If you have a password like ‘password123’ or your pet’s name, you need to increase your level of security, particularly for financial accounts and email. Consider boosting your login protection. Especially for financial accounts, add an extra layer of security with multi-factor identification, or multiple passwords, codes and security questions. And, if you have trouble remembering all your passwords for various services you use, consider using a password manager. We do not recommend any one brand, but we do recommend selecting a product with multi-factor authentication for the most security.
Check your beneficiary designations
People die, get divorced, get remarried, have children. And when those and other life cycle events occur, people often forget to review their life insurance and retirement account beneficiary designations. If it has been a while since you have looked at them or don't know what they say, it is a great tip to get organized.