Spring is finally here, and that means it’s time for some spring cleaning. While you are busy cleaning out your closets and power washing your house, you may want to declutter your finances while you’re at it.
Organizing anything can feel overwhelming. However, keeping your finances in order can give you peace of mind and help you save money. So, here are a few ways you can declutter your finances this spring:
Have you ever tried to start a project and stopped right away because you didn’t know where to begin? It is easy to give up when you don’t have an end goal in mind. Before you get started, it is imperative to set goals for this project. Sit down and determine what areas of your finances you want to tackle first.
For example you may want to start by getting your budget in order. You could start by reviewing all of your bills and expenses. Another example would be to create a filing system will different folders for every financial category. Some of these folders would include investment account statements, bank statements, insurance policies, health insurance information and claims, tax returns, receipts, and more.
Whatever area of your finances needs tending to should be your top priority. So, take some time to determine what area of your finances you would like to address first.
Create a filing system
If you don’t already have one, developing a filing system can take away a lot of headaches when it comes to your finances. Having one place for all of your documents makes finding anything a breeze. Even if you have a lot of electronic documents, you still need a place to put originals, such as your passport, Social Security card, or birth certificate.
First, find a safe place for your filing cabinet. You may not want to keep in the basement in case of a flood or fire. Do some research on a nondestructive cabinet that could keep your documents safe even in extreme cases.
Next, make a folder for each category of your finances. You may choose to keep a lot of your files stored on your computer but if you decide to store them in your filing cabinet, create labels for everything. Some items you will want to create folders for include:
- Taxes for the past 6 or more years. The IRS normally only audits up to 3 years but if they find an error they can audit you for additional years.
- Bank statements
- Investment statements
- 401(k) information and statements
- Insurance information and claims
- Living will, trust, and Power of Attorney documentation
- All debt records including credit card statements
- Employer benefits
- Retirement plans
- Bills and expenses
- And more…
You may also want to create a master document explaining everything in the filing cabinet. In case something were to happen to you, your family would know where everything is and how to locate it.
Discard what you don’t need
As stated above, you may need your tax returns for several years back. Other documentation may not be as important to keep. Go through all of your documents with a fine tooth comb and discover what you may be able to discard.
You may have bills from your old cable provider or documents of past debts you have reconciled. If you have information from a past insurance claim, reach out to your insurance company and see if you still need to keep the document and if so, how long.
Become a “shredding pro”
With identity theft on the rise, you can never be too safe. If you are discarding documentation with any personal information, be sure to shred it. Your information is way too valuable to throw it in the recycling bin for a thief to find. Protect yourself and become a “shredding pro”.
Upload your documents
If you want to keep most of your documentation on your computer, you can create a similar filing system. Get in the habit of scanning all of your important documents and organizing them into designated folders.
In order to protect your identity you may want to encrypt all of your online files. You should also back up your files on an external drive, flash drive, or cloud storage. You don’t want to take the risk of your computer crashing and losing all of your personal information. It is always better to be safe than sorry.
Review all banking statements and bills
Upon organizing your documents, you may also want to review your bills and bank/ investment statements. This could be a prime opportunity to evaluate where your money is going and if there are better options out there. It could also help you review your spending habits so you can decide if you need to make some adjustments.
When you review your bank and investment statements, look at your fees and your returns. If you feel as though you are being charged too much or think there is a better option, start shopping around and research different possibilities.
Then, look at your bills and expenses. Do you think you may be able to save money on some of your expenses? For example, let’s say you want to lower your cable bill. Compare competitors prices and then call you service provider and see if they are willing to lower your bill of off you special pricing for being a loyal customer. It never hurts to ask, you never know what savings you may receive.
Develop an action plan
Once you have organized and reviewed your finances, it’s time to take action. Whether you want to call some of your service providers and lower your bill or you need to create a living will, determine a plan of action for completing each task.
You may have multiple tasks you want to accomplish, so make a list and start with your top priority. By developing an action plan, you will have a direction to go in.
Taking this opportunity to declutter your finances can help you save money and minimize your headaches. If you feel overwhelmed by the amount of work you have at hand, take it step-by-step. As soon as you start, you will begin to feel more organized.