Repost: Spring Cleaning Your Finances
Originally posted May 14, 2018. By Olga Okaty:
With spring arriving at last and beautiful weather beckoning, it may seem daunting to undertake any spring cleaning initiatives, especially financial ones. Mid-year, however, is a perfect time to check in and self-evaluate and chip away at your financial goals for the year.
Here are some smart ways to make a big impact on your finances easily and quickly:
Replenish Your Emergency Fund
If you’ve dipped into your emergency savings over the holidays or perhaps more recently for a winter getaway, taxes, or seasonal home repairs, replenish this account now. An adequate emergency fund should include enough cash to cover at least three to six months of living expenses. Even if this figure seems unattainable at first, work toward this goal steadily, making regular contributions biweekly or monthly even if they are small initially. Over time, these savings will accumulate.
Set a Savings Goal
Revisit your financial plan and set a budget-appropriate savings target for 2018 to make progress towards your long-term goals. If you are actively contributing to a 401k, 403b, or another retirement plan but cannot contribute the maximum amount, consider increasing your contributions just slightly by 1% or 2%. The effect on your cash flow and net take-home pay will be relatively small, but the long-term compounding effect of these additional savings over time can be significant. These additional contributions may also reduce your 2018 tax bill.
Check Your Credit Report
As part of your annual recordkeeping update, check your credit report to ensure all information is accurate, complete, and up to date. You can request a free copy of your credit report every 12 months from Equifax, Experian, and TransUnion, and any errors can be corrected by submitting a dispute online.
Shred and Discard Old Documents
Shred and dispose of any old financial documents, such as tax records older than seven years, pay stubs and bank statements older than one year, and credit card statements older than two months. Our recent blog on this subject provides additional tips and guidance on what to toss and keep.
Book a Meeting with Your Estate Attorney
Connect with your estate attorney to revisit your estate plan and ensure all information is up to date and properly reflects your current wishes, especially if your estate plan is more than seven years old. Life events such as births, marriages, divorces, or new business ventures may warrant a document revision or asset retitling.
If you do not yet have an estate plan, make this your top priority for 2018! It’s truly easier than it sounds and a good estate attorney will make the process efficient and transparent. At a minimum, your estate plan should include a will, a living will, a medical power of attorney, and a durable power of attorney. If you have young children, the will is particularly important as it names their legal guardians. If you have children of major age, consider having health care proxies prepared for them as well to streamline medical care in case of an emergency.
Getting your financial house in order can sometimes become an involved process, one that we often put off as other priorities or enticements command our time; however, some areas are much easier to tackle than others once you get started. Beginning with the five tasks above is a great start.