Invest Financial Planning

How to Get Your Finances in Order During Spring Cleaning

Sara Gelsheimer  |  April 15, 2021

Spring cleaning isn’t just for closets, and this year, our wallets need a freshening up more than ever. Here’s how to clean up your finances.

The birds are chirping, the flowers are blooming, and the weather is warming. Spring is in the air. Which means Spring Cleaning is here. And for many of us, so is the urge to deep clean our homes, garages, cars — pretty much everything in our lives.

However, one critical aspect is often overlooked in the spring-cleaning frenzy: our personal finances.

Unlike cluttered closets and dusty furnishings, finances are not something you see every day. You probably don’t spend a lot of time talking about money, either, so it’s easy to forget about it until your credit card bill comes.

Just like with your house, however, getting your finances in order will give you peace of mind and make the year ahead much smoother.

How to Clean Up Your Finances

To spring clean your finances, set up a time that works for both you and your partner, preferably with as few distractions as possible (like kiddos running around or your latest TV binge playing in the background). Be sure to come to your cleaning session prepared — not with dusters and a vacuum, but with the last few months of transactions on your credit cards and bank accounts; recent copies of debt (including the interest rate and current balance); a list of regular expenses; and login credentials for retirement accounts, bank accounts, brokerage accounts, etc.

Once you’ve gathered all the tools to clean up your finances, here’s what you should focus on:

1. Create a net worth statement

A net worth statement is essentially a snapshot of your finances, focusing on what you own and what you owe. It’s a great starting point because it can help you be more mindful of your spending, track your progress toward your goals, plan for big purchases, and so much more. Even if you’re in good standing, it’s important to have this view into your finances, especially over time.

2. Check your goals

Any type of saving and financial planning starts with goal setting. Without something to reach for, you’ll probably spend more money than you intend to — something we’re all guilty of. Decide what’s most important to you in the short, mid, and long term — then write those goals down. Each spring, you can review them to see whether you’re on track. Here are some common goals and questions to ask yourself when reviewing them:

  • Reducing debt: Could you benefit from consolidating any credit and/or renegotiating the rates? Does it make sense to refinance your home?
  • Building an emergency fund: Do you have at least three to six months of living expenses on-hand? Pro tip: Consider keeping your emergency fund in an online account because online accounts usually pay higher interest than brick-and-mortar banks.
  • Planning for retirement: Are you maxing out your 401(k)s and/or IRAs? Do you have an old 401(k) from a previous job that you can roll over to an IRA or move into your new 401(k) if you’re able to?
  • Saving for kids’ education: Are you contributing to a 529 education account? Can you increase your contributions? Do you need to reduce your contributions so you don’t overfund the account?

3. Go over your budget

Depending on your goals and expenses, your budget may fluctuate throughout the year, which is why it’s smart to review it annually at the very least. Pull the last three to six months of credit card and bank statements; determine whether you can cut any expenses (like unused subscriptions) and whether they line up with your financial goals.

You can make budgeting easier by connecting your bank accounts and credit cards to apps like Mint or BrightPlan, which aggregate the spending data to give summaries of various categories. For example, you can quickly see how much you spent on groceries in a given month and adjust accordingly.

4. Review important financial info

You probably have a ton of financial documents floating around. Spring cleaning is the perfect time to make sure they’re up to date and have all the correct information. Consider the following:

  • Review the beneficiary designations on 401(k)s, brokerage accounts, life insurance policies, cars, and bank accounts. Additionally, ensure your wills, healthcare powers of attorney, durable powers of attorney, and trust documents are accessible.
  • Check your credit score, which you can do for free with the main credit bureaus (e.g., Experian, Equifax, TransUnion) once a year. Are there any red flags?
  • Review your property and casualty insurance plan. Have you made improvements to your home that would warrant additional coverage? Has your net worth grown enough to increase your excess liability coverage?

5. Assess your investments

You may not handle all your investments, but you still need to check them regularly — or ensure your financial advisor is on the same page as you. Most importantly, what is your overall asset allocation, particularly the allocation between stocks and bonds? Is it in line with your target?

If you’re targeting an allocation of 80% stocks and 20% bonds and the market has performed really well, for example, you may now be closer to a 90/10 allocation and want to rebalance. There may be positions where you can harvest losses and buy into a similar fund to maintain your overall allocation. Also, check whether you’re sitting on any excess cash that could be used to pay off debt or invest in the market. If you haven’t maxed out your IRA or Roth IRA contributions for 2020 yet, for example, be sure to do so — your future self will thank you!

Reviewing your finances regularly — or just during Spring Cleaning — will keep your goals top of mind and give you peace of mind that things are moving in the right direction. And who knows, just like you might find a cute, unworn sweater when you clean out your closet, you could find some extra funds lying around, too!

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Disclaimer: This material has been prepared for informational purposes only and should not be used as investment, tax, legal, or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal, and accounting advisors.
Plancorp/BrightPlan [full name](“Plancorp/BP”) is a registered investment advisor with the Securities and Exchange Commission (“SEC”) and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure and our Form CRS for additional information regarding the qualifications and business practices of Plancorp/BrightPlan.
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