By Andrew Housser
There is something about the smell of spring in the air that makes many people want to give their lives a little update. They may make windows sparkle, clean out garages, and toss or donate to charity unwanted, unused items. But spring cleaning should not just be something that you do to your physical home. It applies to your financial house, too. When spring fever hits, follow these steps to get your finances in order.
Scrutinize your banking.
If you have several accounts open at different banks -- perhaps due to a move – see if you can consolidate to one bank that meets every need. To select a bank, compare different institutions' offerings including monthly fees, interest rates and online bill-paying systems. Once you've chosen a bank, set up automatic payments for as many expenses as possible. This lowers the risk of late payments and also helps with monthly budgeting. Cut down on paper clutter by requesting to view monthly statements and canceled checks online.
Check your credit.
Request free annual credit reports once a year from the three credit bureaus via Annual Credit Report. Correct any errors that could be dragging down your score. Then, take a look at the interest rates you are paying with any debt you are carrying. You may be able to persuade creditors to lower your rates if your credit score is good and you have a history of making payments on time. Call and ask.
Update your budget.
Take a hard look at where your money goes each month. What can you do without? Where can you save? Make sure you have at least enough to cover six months' expenses set aside for emergencies. If you are not close to this amount, see where you can trim spending. Set up automatic transfers into a savings account so you are not tempted to spend that money.
The April 15 tax deadline makes spring the perfect time to evaluate your withholdings. A large refund is a sign that you are "loaning" Uncle Sam too much of your hard-earned dollars throughout the year. A large payment indicates that you need to let go of a little more each month. Use the IRS Withholding Calculator to determine how best to adjust your federal income tax withholding allowances.
Inspect your insurance.
Review current home, car and life insurance policies to make sure you have adequate coverage, and that the beneficiary information is up to date. If your car is aging, you may be able to save money by dropping comprehensive coverage. You also can raise deductibles to lower rates -- as long as you are comfortable with the amount you would need to pay should a claim occur. Shop around for quotes for home, car and life insurance policies. Compare rates at a site such as einsurance.com, then talk to your current insurer and see if they can match or do better.
Sort through the paperwork.
The stacks of unneeded documents can get large when you clean house. Shred any documents containing personal information, such as your Social Security number or bank account number, to protect against identity theft. Going forward, look into whether your financial documents, including insurance policy statements and credit card statements, are available online. This will help cut down on paper clutter. Make sure, though, to keep up to seven years of tax documents.
Review your retirement plan and investments.
Consolidate any old 401(k) accounts into one, preferably at your current job. Or move them into a self-directed individual retirement account (IRA) through a major mutual fund company. Many retirement plans allow employees to make catch-up contributions through mid-April (check with yours). Determine whether your current efforts are still on track to meet your future retirement needs. As you approach retirement, make sure to align investments with risk tolerance. A financial planner can help.
Spring cleaning can be a time-consuming process -- especially if you have not done it in a while. But once your financial house is in order, you'll have greater peace of mind.
Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.