Spring Clean Your Money
Spring brings the promise of a fresh start and the opportunity to hone in on any of those New Year’s resolutions you may have put off. So as you get your house in order, you might want to consider dusting off your wallet and savings as well. Here, we round up 10 great ways to get your finances in check, from adjusting your taxes to making the most of the duds in your closet.
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Adjust Your Taxes
Consider looking at the amount of money you’re withholding and modifying it for the next year. You should be trying to come out even at tax time so that you can increase your cash flow on a monthly basis, according to Frank Boucher of Boucher Financial Planning Services.
A big break means that the government is using your money interest-free, while a big bill means that you should try re-filing a new tax-form with your employer to see if you can decrease the tax withheld for the following year. Read this recent article on how to avoid the underpayment penalty.
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Consolidate Your AccountsIf you find you have multiple investment accounts at multiple institutions, it doesn’t hurt to consolidate them.
This will get rid of the overlap and the unnecessary fees that come with it, such as management fees and transaction costs, according to Scott A. Leonard, an economist at Trovena.
“It helps the client manage and keep their minds around their finances when there are less accounts to follow,” said Devin Pope, a wealth adviser at Albion Financial Group. He added that it also will also make clients worry less about their account information being stolen because less of your personal information is out there.
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Review and Rebalance Your InvestmentsTake some time to go over your investments and ask yourself, am I on track?
This means gauging how much risk you’re currently taking. Identify the appropriate mix of investments you want and the investment vehicles to suit those investments, advised Troy Sapp of Commencement Financial Planning. He added, “[Clients] should also measure their portfolio’s risk/return characteristics over time and make adjustments to their strategy for changes in their lives and/or economic and legal environments”
Marguerita Cheng, an adviser at Ameriprise Financial, said another consideration is your time horizon, or how long you want to hold your investment.
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Rethink Your Estate PlanWhile spring is normally a metaphor for rebirth, many financial advisers say it’s a good time to look into estate planning choices.
Make sure that your estate plans are in line with your current situation by verifying your coverage amounts, confirming and updating all of the beneficiary designations for your accounts and, as Brian Fricke, president of Financial Management Concepts, suggested, converting your retirement savings account to a Roth individual retirement account for tax benefits.
“Recently one of our clients inherited a substantial IRA from a relative,” Fricke recounted. “Unfortunately they didn’t name a designated beneficiary, so the proceeds will end up going through probate and the account will have to be liquidated within five years,” he says, adding that the client’s relative could have made his estate finances much easier to handle if he had switched the account to an inherited or stretch IRA.
You never know what can happen, so keep abreast of all your plans so that your money goes to the right place.
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Reduce DebtReview your credit report and credit score by obtaining a free copy at AnnualCreditReport.com and other credit report providers.
Weed out the discrepancies, if there are any, and report it to the agency and request a confirmation that it received your request. This will help keep track of how long it takes for the issue to be resolved, which should take one to two months.
Laura Scharr from Ascend Financial Planning quipped that this is a good step to take on April Fool’s Day since you’ll be ensuring you do not become the fool.
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When cleaning out your closet and expenses, ask yourself: What are you really using?
Consider changing your service plans for cell phones, cable and insurance. Look into packages for the whole family and consider switching your cell phone bill to an unlimited texting and calling plan, which is fiscally friendly and will help you avoid overcharges. If you bundle up your cable, TV, internet and phone services, you may be able to save money with a better deal, too.
“I was able to drop my cable bill by more than $50 a month (with the exact same service) just by asking for a better deal,” Scharr says.
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Revisit Your HSA or FSA NeedsFinancial advisers said that there are a few important considerations to make when you’re considering your health savings options. This is the time to open, file your claims or contribute to your health savings account and flexible spending account.
If you do not have these health savings options, consider opening up an account. Putting aside money into an HSA or FSA will help you to use pre-tax money on medical expenses you’re already planning to spend anyway.
If you already have one, make sure you file your claims for the year. FSAs have a “use it or lose it” policy, which means that the money that you set aside and have not used will not be rolled over for the following year. Some deadlines for processing your FSA claims can run up to the end of March, so you should process any claims from last year by spring to make sure you are not leaving money on the table.
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Toss Out Old ItemsDoing some real spring cleaning around the house can also help you save money.
Susan Elser of Elser Financial Planning recommends that you try selling any unused items on eBay or Craigslist. If you are still paying registration or insurance on a long-forgotten item such as an old car, boat or insured jewelry, for example, selling these off can help you double your rewards.
If you also feel like “doing good” for your community, gather your clothes and household goods and donate them to charity. This will not only give you some personal gratification, but it can also mean a tax break for next year. Make sure to store your receipt in a safe place, though!
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Make the Most of ‘Found’ Money
This year, Social Security tax went down, which means that more Americans have ‘found’ money, or money that was previously “lost” to other expenses like taxes.. You can do several things with this ‘found’ money to make the most of it.
“Make sure you are contributing at least enough in your 401(k) to receive an employer match,” recommended Joseph Alfonso of Aegis Financial Advisory. Otherwise, you’re leaving money on the table.
Another viable option is to invest it in a Roth IRA, which enables tax-free growth.
Elser advised that ‘found’ money can also be put into a 529 college savings account. Some states offer a tax credit for funding their children’s college account so you can receive an added benefit.
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Set Aside Money for SavingsThinking ahead for next spring is also an important part of spring cleaning. Often, thinking ahead means saving.
An automatic savings account can be a great way to jump-start your savings. An automatic account will help you reach your goal of intended savings for the year and it will ensure that you don’t spend your money before you save it.
Do not just save to hoard, warned Boucher, but save with a purpose in mind, i.e. an emergency fund, new house fund, new car fund, vacation fund, etc. “If you do this you will be less tempted to dip into your savings for impulse buying,” Boucher added.
Saving at least 10% of your gross annual income is a healthy option for your long-term budgetary goals, Alonso said.
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