Financial Spring Cleaning administrator April 5, 2019 April 2019 BD, Business Dynamics A Simple Checklist Spring is here, and it’s the perfect time to complete a financial clean-up of your home and your finances. Here are a few ways to get started spring cleaning your finances. 1. Banking The banking industry is quite competitive. If you’re not getting any perks from your Credit Card Company or bank, it’s time to make a switch. Credit Cards Credit card companies today offer everything from travel rewards to gift cards to cash back. Many cards even offer perks without requiring an annual fee. If you pay your credit card balance faithfully each month and are only rewarded with a good credit score, it may be time to shop around for a new card. Keep in mind that when you apply for a new credit card, your credit report takes a hit, so take your time researching and don’t apply for multiple cards. Bank Accounts Are you still paying minimum balance fees, monthly checking, or savings account fees? How about ATM or overdraft fees? Don’t! There are too many bank options these days competing for your business to still be paying multiple fees. What about interest rates? Is your money making money? The Federal Reserve recently raised interest rates, but the average savings account rate is still only 0.06%. If you’re not making at least that, it may be time to think about switching. Do you bank with a brick-and-mortar bank? How often do you actually go into one of their branches? If you think you can go without having an actual bank to walk into, consider switching to an online bank. Not only do online banks have minimal fees, they boast some of the highest interest rates around. E-Statements and Auto-Pay Save a tree and lower your risk of identity theft by switching to receiving online statements only. If you prefer to have a paper copy, make sure you shred the statements before tossing them out. Consider switching to auto-pay whenever the option is offered. American households tend to have many different bills to pay all due at different times; it’s easy to accidentally overlook one. If you switch to an auto-pay billing option, payments are deducted automatically when they are due, so it’s one less thing to worry about. Just be sure to occasionally review your statements to ensure the right amounts are being deducted. 2. Request a free credit report You can request a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). Once you have your credit report, you can check for and correct any errors. This is especially important if you’re thinking of making any big purchases, like buying a new home. Our checklist will help you know what to look for in your credit report. Try setting a calendar reminder so you remember to check your credit reports on a regular basis. You can request all three reports at once or you can order one report at a time. By requesting the reports separately (for example, one every four months) you can monitor your credit report throughout the year. Just like with the big three consumer reporting companies, you can also get free copies of your nationwide specialty consumer reports every 12 months from many of the specialty consumer reporting companies. Specialty consumer reporting companies collect and share information about employment history, medical records and payments, check writing, or insurance claims. 3. Address debt If you’re facing a large debt or your payments are overdue, your first instinct may be to ignore the debt or hope it goes away. But, that may make things worse and lead to more stress down the line. There are strategies that can help you make payments that work for your current financial situation. First, review your bills and make sure you understand what you owe. Our bill tracker can help you stay on top of your payment due dates. Second, contact your lender to see if alternative payment options are available. You may be able to change your due date so that a payment is due closer to when you receive your income. Or, you could explore extended repayment options depending on your financial situation. 4. Review your spending Have you ever looked at your credit card bill and wondered where all those charges came from? Or, have you found yourself swiping your credit card for a purchase before you’ve had a chance to think about it? Gain control over your credit card spending by taking a close look at your credit card purchases over the past couple months. If you’re looking to cut back, try breaking down necessary expenses vs. wants. Once you see how you’re spending, try creating a “rule to live by” to make sure you stay on track. These kinds of simple personal guidelines, such as using cash for smaller purchases, make it easier to stick to your goals over time. 5. Save automatically After checking your budget, you may see some more opportunities to boost your savings. For example: If you have a bank account and direct deposit, you may be able to arrange to automatically deposit some of your paycheck to a savings account every time you’re paid, instead of all of it going into a checking account. You can check with your employer to see if it’s possible to split your paycheck into two accounts. You may also be able to transfer some of the money in your checking account into a savings account. You can check with your bank or credit union to see if you can set up automatic transfers. You may also be able to use a prepaid card to set aside money for savings. Did you know that nearly 46 percent of consumers indicated that they could not pay for an emergency expense of $400? When you save for unexpected expenses, you can handle them when they happen without having to skip other bills or borrow money. Start with $500 as your goal. This is enough to cover a lot of common emergencies, like car repairs, a plane ticket to care for a sick family member, or smaller medical costs. 6. Taxes You most likely have already filed your taxes. Did you have to pay in or did you get a refund? If the outcome was not what you expected, it’s time to double-check your withholding allowance on your paychecks. We all want to lower our tax bill. Deductions can help, however, unless you pay to work closely with an accountant, how do you know what qualifies as a deduction? Some common tax deductions include: Dependent child credits, Mortgage interest and real estate taxes, Health insurance premiums, Student loan interest. Take a look at this article for some perhaps surprising tax deductions you should consider for next year: 9 Things You Didn’t Know Were Tax Deductions. 7. Budget When is the last time you sat down and wrote out a monthly budget? Do you know your debt-to-income ratio? A few years ago when I was in the market to buy a house, I opened an Excel spreadsheet and calculated what I spent on average each month compared to the income I bring in. Thankfully, Intuit recently introduced a new app, Turbo, which does this for you with ease. Generally, you want to aim to keep your debt-to-income ratio below 36% and mine was 53%. I had to make some changes. I tightened my budget (mainly by canceling cable TV and renegotiating my Internet bill) and paid off my auto loan. My ratio today is still a bit high, but it’s getting better. Going through the memberships and subscriptions you currently pay is a great way to quickly lower your debt-to-income ratio. Chances are you’ll find you are paying a monthly fee for something you seldom use, or at least can live without. Do you need both Netflix and Hulu? Not likely. Print off the last two to three months of your credit card and bank account statements and go line-by-line to figure out a way you can save some money. Additionally, if you have a Mint account, log in and check out the Trends tab. You can view your spending and see where the majority of your money is going. You may be shocked at how much you spend within a certain category. It’s easy to just hand over your credit card, but actually seeing a graph of how much you spend can be a much needed wake-up call. 8. Retirement It doesn’t matter how old you are, you need to plan ahead for retirement. If your employer offers a 401(k), take advantage of it. This is the easiest way to save for retirement (not to mention it lowers your taxable income.) If they offer to match a certain percentage, even better. Aim to increase your contributions each time you get a pay raise, this way you won’t even miss the money. Do you have more than one 401(k) or IRA? Consider consolidating. Consolidating retirement accounts that share the same tax treatment can be beneficial for two reasons: Keeping all your money in one place makes it more simple and manageable. Having only one account reduces the amount of fees you’re paying. A retirement rollover is the best way to move money from one account to another. It’s important to do so correctly to avoid fees. Check out this article for more information: How to Handle Retirement Rollovers Correctly. For those of you whom have established retirement accounts, when was the last time you rebalanced your investment portfolio? Never? Typically, the younger you are, the more risk you can handle in your investments because you have more time to make up for any losses. The closer you get to retirement age, the more conservative you should be. Financial planning experts recommend that you rebalance your portfolio once or twice a year, but check up on it frequently to make sure you’re in line with your target. As you’re thinking about your retirement planning, also think about your beneficiaries. How long ago did you open your retirement accounts? Are your parents still listed as your beneficiaries on your 401(k) from your first job? Or maybe an ex-spouse is still designated? Review your beneficiaries as it may be time for an update. 9. Legacy Planning Just because Spring is all about rebirth, doesn’t mean we should avoid the subject of death. There are three important aspects of legacy planning that should be dealt with sooner rather than later: Writing a will Authorizing power of attorney Buying life insurance Wills If you don’t want the state to decide where your assets go when you die or, more importantly, who will be in charge of your children and funds owed to them, then you better draw up a will. Another, often forgotten, reason to have a will is to ensure no tension occurs within your family after you are gone. Without a will, you may have relatives arguing over your possessions and everyone may want input on what should happen to your assets. If you have a complicated estate, such as business interests, trusts, multiple investment properties, etc., then you should probably hire a lawyer to help with your will. However, if your estate is a bit simpler (e.g.: married with kids and you own a house) you can draw up your will right online, if you’d like. You’ll need to print it off and get it witnessed and notarized, but it’ll be much cheaper than hiring a lawyer. Power of Attorney There are two kinds of power of attorney: financial and medical. A financial power of attorney is most often just simply referred to as a power of attorney (POA) and this is a document that states a person or organization you name to act on your behalf in regards to handling financial and business transactions. A medical power of attorney is a document that states a person you name who has the authority to make medical decisions for you if you are unable to do so, for example if you’re unconscious or mentally incapable. Most people assume only elderly individuals need to have these POA documents in place, but you don’t need to be 80 years old to get into a car accident and become unconscious. If you become mentally or physically incompetent, your designated POA agents can make decisions on your behalf instead of it being left up to strangers who wouldn’t know your wishes, such as doctors and judges. If you’re over 18 and considered of sound mind, you can draw up both types of POA documents. Hiring a lawyer is an option, but, like wills, you can create these documents online for a fee. Be sure to discuss with your agents of choice before drawing up the documents and make sure they understand your wishes and their responsibilities. Life Insurance Life insurance isn’t the happiest financial product to think about. However, while many Americans admit life insurance is important, many households are underinsured. People are telling themselves “It won’t happen to me,” meanwhile they really should be asking “What if?” If you have young children, life insurance is a must. How would your loved ones be affected if your income were to suddenly disappear? Stop postponing and get a term life insurance quote today. Life insurance is more affordable than you think and because the process is mainly digital, it’s also become much more convenient to buy. If you already have life insurance, good for you! But don’t forget to review your policies periodically after life changes such as a new baby, marriage or divorce, or changing jobs. Your coverage needs may have changed, not to mention beneficiaries may need updating. Although many of these financial spring cleaning to-dos may take a bit of time to complete, you’ll feel accomplished and will ultimately be in a better financial place. Do you have any financial spring cleaning tips to share? Leave a message in the comments section. Leave a Reply Cancel ReplyYour email address will not be published.CommentName* Email* Website Save my name, email, and website in this browser for the next time I comment.