Spring Cleaning: Seven Steps to Get Your Financial House in Order
If you want to improve your money situation and take control of your financial future, cleaning up your finances regularly will help you more readily reach your goals -- and do so with the least amount of stress. Whether you need to overhaul your budget or get a better handle on your credit standing, there are several things you can do to get your financial house in order this season.
Here are seven smart ways to do some financial spring cleaning:1. Review Your Credit Report
By law, you're entitled to order one free credit report yearly from each of the three major credit bureaus. You can get yours at no cost from annualcreditreport.com. Make sure your credit reports are free of mistakes because if there are any errors, it's your responsibility to make corrections when you catch them.
Unfortunately, two-thirds of all adults in America haven't seen their credit report in the past year, according to the National Foundation for Credit Counseling (NFCC).
Once you get your credit report, if you see something you don't like, avoid the urge to run to the nearest credit repair clinic. "In this current economic environment where it's become increasingly hard to obtain new credit, people may be tempted to work with a credit repair company for what they're told will be a quick fix," says NFCC spokeswoman Gail Cunningham. But she cautions consumers that if something sounds too good to be true, it probably is. Be especially wary of companies that propose doing shady things to "improve your credit." "Some may even go as far as to suggest you assume a new identity, which could put you into some pretty hot water legally," Cunningham notes.
2. Organize and/or Shred Old Financial Documents
Sort through your statements, pay stubs, bills and other financial records, and keep only the documents that are absolutely necessary. Since the IRS has up to six years to audit you, keep your tax returns, canceled checks and receipts, and any records supporting your tax deduction for at least six years. If you're unsure about whether you should get rid of certain types of receipts, scan them or make a copy, then go ahead and shred the rest. But don't simply toss paperwork in the trash.
"People often don't realize they can be throwing out sensitive information," says Adam Levin, chairman and co-founder of IdentityTheft911. "But there are people who are dumpster diving or who steal mail, waiting for financial records to exploit."
For the financial records you'll be keeping, try using NeatReceipts, a nifty, lightweight product that can help you easily scan, organize and keep track of your documents -- everything from tax records to receipts to business cards. The NeatReceipts scanner is a breeze to set up and even allows you to export your financial records from your personal computer to Excel, Quicken and other tax preparation programs.
Reducing paper clutter will not only help you stay more organized, it will also put your mind at ease. Plus, since the IRS accepts scanned copies of receipts, having those records available could come in handy in the event of an audit.
3. Record Your Financial Passwords and Store Records in a Safe Place
Make sure you're not using the same password and log in information for all your online bank accounts and other financial 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. Protect yourself against identity theft by logging your financial passwords in a document and storing it in a safe place. Also, important financial documents like a will, stocks certificates or bonds should be put in a safe place like a locked box or an online secure vault.
4. Review your Budget
Is your budget up to date, or have you forgotten to make changes when you had an increase or decrease in income? Take a close look at your budget to see if you need to make any modifications. Make sure you're reporting expenses accurately and have made some room for savings account contributions. Mint, BudgetPulse and BudgetTracker are all good sites offering free online budgeting tools.
5. Analyze Your Insurance Coverage
We all have loads of insurance premiums to pay, ranging from homeowners or renter's insurance to health care coverage, auto insurance, life insurance and more. The only way to know if you're still paying competitive rates is to shop around. Visit sites like insurance.com or insure.com to do some up-to-the-minute rate shopping. You might also consider raising your insurance deductibles, where appropriate, to save money.
6. Set up Automatic Bill Pay
Spring cleaning isn't only about de-cluttering -- it's also about making things more efficient. Set up automatic bill pay, and link it to your primary checking account. Automatic bill pay will eliminate the chances of missing a payment and paying those pesky late fees.
7. Pay off Holiday Debt Once and for All
What does your current debt load look like? Spring is a good time to look at your total outstanding debts and see which loans or credit cards you could pay off entirely this year. At the very least, put yourself on a stricter debt payoff plan, and pay off any debt you accumulated over the holidays. Cleaning up this debt quickly can put you in a much better financial position for the rest of the year.