Spring Cleaning Your Finances

Spring Cleaning Your Finances

Did you know that according to the Cleveland Clinic, the mental health benefits of “Spring Cleaning”—the annual practice that prioritizes decluttering and organizing one’s living space—can have positive psychological effects? It appears that the process of cleaning can actually reduce stress, improve mood, and increase productivity. It can also foster a sense of accomplishment and create a more relaxing environment. And donating or recycling unwanted items can promote feelings of generosity and help others in need.

It’s also the perfect time to dust our finances thoroughly. Regardless of your age or wealth, financial clutter accumulates quickly for everyone. With bills, statements, tax records, and other documents floating around, it’s easy to become overwhelmed and stressed, potentially leading to procrastination and impulsive decisions. To stay focused on what truly matters, establish a routine for financial spring cleaning.

Why Financial Spring Cleaning is So Important

Let’s face it, keeping track of your financial life can be as difficult as finding that missing sock in your laundry. And let’s not even talk about those financial records that you’ve held on to since, well, forever. So, what’s the big deal about spring cleaning your finances? Simple: it helps you stay organized, make informed decisions, and ultimately enjoy the fruits of your financial labors.

It’s Time to Roll Up Your Sleeves: 5 Tips to Tackle Financial Spring Cleaning
  1. Organize your financial records. Seriously, are you still holding on to bank statements from 2005? It’s time to declutter. Create a system to categorize and store your physical and digital financial documents. Remember, some records can be safely discarded after a few years, while others should be kept indefinitely. Forbes recommends retaining tax records for at least seven years, while essential documents like birth certificates, Social Security cards, and property deeds should be stored indefinitely. Other financial documents, such as bank statements and pay stubs, can be discarded after a year. It’s also suggested to keep digital copies of vital records and use secure cloud storage services for added protection.
  2. Evaluate your budget. How are you doing with that budget you set back in January? Take a hard look at your income and expenses, identify areas where you can save, and adjust to get back on track if you need to. Now is also an excellent time to ensure you’re adequately prepared for expenses in retirement.
  3. Rebalance your investment portfolio. Like a garden that needs pruning, your investment portfolio can benefit from regular maintenance, too. Review your asset allocation and ensure it aligns with your risk tolerance and financial goals. A common misconception among numerous investors is that an investment’s strong past performance guarantees similar future results. Regrettably, an investment’s historical performance does not necessarily predict its future success. By closely monitoring your portfolio and making timely adjustments, you can optimize your returns and minimize your risks, ultimately nurturing your wealth like a well-tended garden.
  4. Spruce up your financial security habits. With digital theft affecting up to 17% of the global population, as reported by the UN, and cybercrime costing around $500 billion per year, according to McAfee, safeguarding your financial and non-financial accounts is essential.
      • Audit your passwords. Using the same password or simple variations across accounts is insufficient. To ensure the safety of your numerous online accounts, create unique, long, and complex passwords that are difficult to crack. Employ two-factor authentication, particularly for email and financial accounts. Consider a password manager if you need help remembering or securely storing your plethora of passwords.
      • Stay cautious when clicking links. You’re probably aware of phishing, where scammers use emails to obtain sensitive information. However, vishing (voice phishing) and SMShing (phishing via text) are also prevalent. Never disclose your login or financial details to unsolicited contacts. Verify a link’s destination by hovering over it before clicking.
      • Check your credit report. While credit monitoring services like Lifelock can alert you to changes in your credit history, you shouldn’t rely solely on them. They may not prevent criminals from opening fraudulent accounts but will inform you of any activity on your credit report. In case of a security breach, companies may offer these services for free, as Experian has in the past.
  5. Check your insurance coverage. Insurance is like that umbrella you never think you’ll need until it starts raining cats and dogs. Review your policies, make sure you have adequate coverage, and shop around for better rates if necessary.

As you can see, “Financial Spring Cleaning” isn’t just about tidying up—it’s about taking control of your financial future. With some time and determination, your financial house will be in tip-top shape in no time. And who knows, you might even find that missing sock along the way!

Sheena Hanson, CFP® - Investment Advisor Representative and CCO

More About the Author: Sheena Hanson