Building your Financial Life: Spring Cleaning your Finances

OppLoans Monthly Budget Guide

It’s as sure a sign of spring as Opening Day—with the first warm days of the year comes the urge to deep clean every nook and cranny of your home. But once you’ve washed the windows and KonMari-ed your closet, it’s time to turn your attention to a frequently overlooked spring cleaning project—the annual maintenance of your finances.

Some cleaning tasks come with built-in reminders: If your kitchen floor crunches when you walk across the room, it’s time to vacuum. But too often, our most important money decisions are running on default settings. Life gets in the way, and the careful choices that you made a few years ago are left to gather dust.

Whether your tax documents are still sitting in a pile on your desk, or you haven’t reviewed your retirement plan since Pluto was still a planet, have no fear. We will walk you through the seven key steps of a successful financial cleanup, from getting paperwork under control to checking in on the most important aspects of your financial life.

Spring Cleaning Task #1: Purge Paperwork

As Coach Taylor said on Friday Night Lights, “clear eyes, clear organizational systems, can’t lose” (or something like that).

The first step to eliminating paper clutter is having less of it, to begin with. Save some trees and streamline your own personal environment by going paperless. Consider these common candidates for switching to paperless statements:

  • Bank statements: Be sure you can access bank records for the last three years, in case of a tax audit.
  • Pay stubs: Many employers utilize an online portal where you can access past pay stubs and W-2 forms.
  • Utilities and city services: In addition to gas and electric utilities, many cities offer paperless billing for water/sewer bills and property taxes. While you’re on your city’s website, be sure to sign up for email alerts. Among the benefits of being an informed citizen, many municipalities offer annual cleanup services such as yard waste pickup and bulk item disposal that can save you money on your other spring cleaning projects.
  • Mortgage statements
  • Investment and retirement accounts
  • Credit card statements

Now that you have stemmed the influx of paper, it’s time to organize your existing paperwork. Below are general guidelines around which common financial records you should keep, and which ones are safe to toss.

Tax returns

The IRS recommends saving tax returns and any supporting documents for three years. If extenuating circumstances apply—for example, if you failed to file a return or underreported income—the IRS provides guidance here. Make sure to keep digital or paper copies of any associated W-2 and 1099 forms for as long as you keep the return itself.

Medical bills

Keep copies of paid medical bills for one year, or three years if you itemized medical expenses on your tax returns.

Receipts

Feel free to toss the receipt for the pack of gum you bought at the convenience store. Otherwise, plan to hold on to receipts for three months. For major purchases, keep your receipt for up to a year in case you need to make a return or use a warranty. You should also save receipts for anything you plan to itemize on your tax return.

Insurance

Keep the paperwork for any active insurance policy; expired policies can be shredded.

Mortgage and home

When you buy a home, you will need to save original copies of the closing statement and deed for as long as you own the property, and to retain documentation of a paid-off mortgage forever. In addition, consider keeping records of any major home improvement projects or purchases for your own reference or for future owners, particularly if those purchases include a warranty.

Automobile

Keep your automobile title for as long as you own the vehicle, as well as records of any paid off car loans.

Some documents, however, are with you for life, such as those involving major life events.

Personal identity

Plan to retain forever any birth certificates, adoption certificates, passports (current and expired) for yourself and your family, as well as any marriage certificates or divorce decrees.

Estate planning

Keep fully executed original and digital copies of all estate planning documents, such as wills, revocable living trusts, medical directives, financial power of attorney designations, and any other instruments you have in place.

Digital keys

To ensure security and accessibility, using a password management tool is a best practice for creating and storing your digital passwords, particularly for services providers who hold sensitive and personally identifying information. Write down a copy of your master password and store it with your important documents.

You’ve done the hard work of paring down your financial paperwork to only the essentials—don’t stop now! For under $50, you can purchase a fire- and water-proof file safe for your home to secure and organize your most critical documents.

Any paperwork that you no longer need should be destroyed, especially if it contains any personal information (i.e. pretty much everything). If you don’t own a shredder, cities, libraries, or financial services providers often host shredding days, where you can bring in documents to be disposed of in bulk. Office supply stores will also shred sensitive documents for a fee. You can purchase inexpensive shredding scissors to help keep a handle on incoming paper.

Spring Cleaning Task #2: Get Ready for Retirement

‘Set it and forget it’ is a great strategy for Crock-Pot meal prep; less so for retirement. Your annual financial cleanup is the perfect time to reevaluate your retirement planning. Ask yourself some critical questions: Have you had a significant change in income since you last looked at your retirement funds? Have your retirement plans changed? What does your timeline look like, and do you need to move to more or less aggressive investments? Are you setting aside enough money to meet your retirement goals?

While you are reassessing your overall retirement picture, use this opportunity to take care of any housekeeping items. If you have funds sitting in an old 401(k), or a pool of money sitting in a savings account earmarked for retirement, now is the perfect time to move it to an IRA or another retirement account.

 

Spring Cleaning Task #3: Do a Credit Check

While you’re checking off items on your spring cleaning list, don’t forget to also check your credit report for errors or suspicious activity. You are entitled to access a free annual credit report from each credit reporting bureau. If you have children, you can also check their credit, and may consider freezing their credit until they are of an age to use it to reduce the risk of fraud.

Spring Cleaning Task #4: Update Insurance

Life moves quickly, and a lot can happen in a year. A crucial step in your financial cleanup is making sure that your insurance coverage still meets your needs.

Are you tackling spring cleaning in your very first apartment? Make sure that you are covered with renter’s insurance. A newlywed or new parent? Now is the time to consider life insurance, or reevaluate your existing policy to make sure you have sufficient coverage. In addition, take a look at all of your current insurance policies to make sure that the correct beneficiaries are listed, and update if necessary.

If you own your home, this is also the perfect time to review your homeowner’s insurance. Take an inventory of your assets and update your policy accordingly. For further protection, you can also take a video inventory of your home and upload it to cloud storage. The better your records of the contents of your home, the more likely you will be able to recoup your property in the event of a loss.

Spring Cleaning Task #5: Make an Estate Plan

No one likes to talk about worst-case scenarios, but it is important to prepare for things you hope will never occur. Let this be your annual reminder to ensure that you and your family are protected.

If you have already created your estate plan, think through any major life changes that have taken place since you last updated them. Marriage, divorce, or the birth of a child are common scenarios, but some other triggers that are not always considered include acquiring significant new assets such as property or an inheritance or moving to a new state.

Spring Cleaning Task #6: Hunt for Bargains

You’re on a spring cleaning roll, so keep up the momentum! Invest some time in online research, make a few phone calls, and you can likely save yourself some cash going forward. When was the last time you shopped for services like car insurance or a cell phone plan? Maybe you’re ready to cut the cable cord and switch to streaming. Or save money on interest by refinancing your student loans, or negotiating a better interest rate with your credit card company. There are lots of options out there, and doing the legwork now means savings later.

Spring Cleaning Task #7: Revisit your Budget

As you read in our introductory budget guide, a budget is a living document that should be periodically reevaluated to make sure it still reflects your financial priorities. As you work your way through spring cleaning your finances, revisit your budget, paying particular attention to your big picture goals. Make any adjustments needed to accommodate the changes you made throughout this process.

In truth, an annual review of your finances doesn’t necessarily have to be a spring cleaning task but can take place at any time of the year. What is critical is regularly checking in on your overall financial landscape—making informed decisions about where your money goes and ensuring every dollar is hard at work in helping you reach your goals.


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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.