Spring Clean Your Finances

A little financial feng shui can save you money and time.

Spring is notoriously a season for cleaning and purging. We clear out the old to make way for the new. Don’t stop with the garage—spring is a great time to clean out your financial house as well. Here’s how:

Clean out files. Files have a way of growing and reproducing. Spring cleaning provides an opportunity to clear away unnecessary paperwork and clutter. Most of us keep far more than we need to. Below are some general guidelines:

  • Pay stubs: Keep your pay stubs until your W-2 comes at the end of the year, then toss them.
  • Monthly bills: If you’re like most people, you diligently file your monthly statements, such as credit card, utility, phone, and cable bills. These stack up quickly. Unless you’re trying to resolve a billing dispute or you need to save a statement for tax purposes, you can discard the previous statement as soon as the new monthly statement comes. Better yet, if you sign up for online payments, many of these statements will come in digital form.
  • ATM receipts and bank deposit slips: Toss these as soon as you reconcile your account each month.
  • Mutual fund and brokerage statements: Keep monthly statements until you receive a year-end statement, then toss them. Keep year-end statements for at least three years (six if you are self-employed).
  • Stock and fund purchases: Keep records of these for as long as you hold the investments.
  • Tax returns: Keep tax returns for at least six years.
  • Receipts: Keep receipts that you’ll need for your tax returns.

Go digital. Consider making digital copies of your financial information, such as tax returns. This will eliminate clutter and allow you to save more information. For example, you only need to save tax returns for six years; however, they may come in handy in the distant future. A digital archive makes it easy to save them forever.

Check your credit report. You can check your credit report for free once a year—and you should take advantage of this. Your credit report may contain mistakes, or worse—evidence of identity theft. By checking it once a year, you have a better chance of catching mistakes and correcting them in a timely manner.

Revisit your portfolio. You may have worked hard to achieve your asset allocation, but things fluctuate with time. It’s important to check in and see if you need to rebalance your portfolio in order to maintain the right mix of investments for your needs.

Review your insurance coverage. Things change. Life changes. Are you appropriately covered? It’s a good idea to check in at least once a year and make sure you’re carrying the proper amount of coverage. Furthermore, by shopping insurance rates, you can usually save some money.

Adjust your savings. Did you get a raise at the beginning of the year? If so, did you adjust your savings to reflect that raise? If you have your savings automatically deposited each month, now is the time to reevaluate the amount—and raise or lower it accordingly.