For many, rising temperatures and an influx of new greenery are not only signs that spring is here, but that it’s time to clean house. The wintry financial climate of the past year has probably seen quite a bit of grime build up on your finances as well, so, like your home, they could probably use a good scrubbing.
Here are some areas where a little time and effort can make it easier to keep up with your money, and quite possibly save you a little cash as well:
Review your spending plan… Take a look at your annual and monthly expenses and slash anything that’s no longer serving you. Are you paying for more cable channels than you really need? Do you still have a gym membership when you haven’t gone in months? Have you incorporated any increases or decreases in your income? Have you spent more, or less, than you planned to in certain areas? Make sure you’re reporting expenses accurately and have made some room for savings account contributions.
Credit cards/debt… Check your credit report; shop around for lower interest rates; come up with a payment strategy. A 50- or 100-point change in your credit score can mean the difference between great loan terms and terrible ones, and inaccuracies in your credit report can drag the score down. With a good credit report you can contact your credit card companies and ask if they can do better with their rates.
Develop a plan to pay off your debt. Any tax return you’ve got coming can help you make a big dent in your debt, so consider using it for just that purpose before spending the extra on less important things. Tackle your lowest balance account first, and make the largest payments you can. Once that one’s taken care of, you move down the list to the account with the next-smallest balance and increase those payments. Repeat the process until eventually everything has been paid off.
Shop Around for Better Rates… We often shop around for the best deal when we sign up for a new service, but once it’s become a monthly line item in our budget, we tend to pay it and forget about it. Take this time to re-evaluate your regular expenses and see where you can save some money. Examine things like your cell phone bill and do some research to find out if there are any new plans or promotions you qualify for. Call up customer service and negotiate – they’re often willing to make a few concessions to keep a longstanding customer, whether it’s giving you a discounted rate or some premium features for free. Don’t forget to arm yourself with the prices competitors are offering; threatening to switch providers can go a long way in making your provider willing to work with you.
Retirement accounts and investments… Consolidate and/or rebalance your accounts; update beneficiaries. Consider increasing your 401k savings. At the minimum, be sure to save enough to earn the full match from your company. If you increase your savings at the same time as your annual raise, you probably won’t even miss the extra cash. Check your withholding… Tax return checks seem wonderful, but if you received a big return this year, it just means you gave Uncle Sam an interest-free loan out of your paychecks throughout the year.
Banking… Consolidate accounts; streamline with online statements and automatic bill pay (a good way to avoid late fees); toss old statements and checks. But remember – leaving important documents in the trash without properly shredding them is a bad idea. They are just waiting to be picked up by an identity thief.
Manage your Financial Passwords… Make sure you’re not using the same password and log in information for all your online bank accounts and other financial accounts. Never use the same passwords for social media accounts. Even though you might be logging in over a secure Internet connection, there’s still a risk that someone who figures out your password will attempt to access other accounts with the same log in information. Change your passwords regularly. Remember two rules for creating strong passwords: length and complexity. Consider using “login verification” too. Instead of relying on just a password, login verification introduces a second check, such as a photo, to make sure that you and only you can access your online accounts. Use a password protected or encrypted management tool to store passwords safely.
Estate planning… Create or update a will or trust; consider a living will and financial power of attorney; destroy old documents. An annual review remains important, because when your life changes, the parameters of your estate documents need to change, too. Make sure you’re still comfortable with the executor and beneficiaries of your estate. Old and obsolete documents may only cause confusion later, so shred them.
Insurance… Get new quotes for car, home and life insurance policies; update beneficiaries. You may find that a bit of research can save you hundreds of dollars. Be sure you’re sufficiently covered. If you’ve done significant renovations or additions to your house and haven’t revised the policy, be sure to take those upgrades into account. Give your life insurance policies a second look if you’ve had a major life change. A new baby might warrant increased coverage, for example, while a divorce or death might require a beneficiary change. If you renew or change any policies, shred your old documents.
Cleaning up your finances this spring puts you in a much better position for the rest of the year.
Note: The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendation for any individual. Please remember that past performance of investments may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this post serves as the receipt of, or as a substitute for, personalized investment advice from Vermillion Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed within this newsletter to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.
Charles Schwab