For many, spring means opening windows, sweeping the dust out and rotating our wardrobes. While you’re freshening up your home, consider ways to also tidy up your finances. You may be surprised at what’s hiding in your accounts and inboxes, financial documents and tax returns.
Consider these five strategies to help you spring-clean your finances:
- Clean Up Your Accounts
Do you find it challenging to keep track of your various financial accounts? Many people have checking or savings accounts at one bank, a brokerage account with another and an individual retirement account with yet another. Having several accounts at different institutions can make your financial house feel disorganized.
Consider consolidating your accounts into one relationship to gain a clearer understanding of your financial streams and overall wealth. Or, if you prefer to maintain accounts with different banks, take advantage of digital tools that let you see all of your accounts in one place. Getting that full picture can bring fresh perspective about what you need to prioritize, as you manage day-to-day cash needs and pursue your longer-term goals.
- Declutter Your Debt
Do you ever feel like your debt is in disarray? If you have multiple loans and credit cards, with different interest rates and payment dates, it might be time to consider debt consolidation. Paying off your various debts via a single loan with a competitive interest rate not only helps you save money, it also leaves you with one simple payment date each month. This, in turn, may help reduce financial stress. A HoyleCohen Financial Advisor can tell you more about possible debt-consolidation strategies.
- Toss Out (Some) Paper
If you’re still getting paper statements from financial institutions, why not change your preferences to “paperless” notifications? This includes credit cards, loans, brokerage accounts—even bills. Going paperless reduces the amount of physical clutter in your home, and it’s also more ecofriendly. When you receive statements digitally, you can more easily track your finances because your statements are all in one place.
As for existing paper records, many institutions will allow you to upload important documents into a secure digital vault. Once you have a digital copy, you can generally shred the paper ones. Records you should definitely keep (digitally if possible, but paper records if not) include the past seven years of tax documents and any documents related to still active loans.
- Organize Your Income and Expenses
When was the last time you took a long look at your monthly finances? Just as going through your whole closet can help you decide what to toss or keep, taking inventory of your income and expenses can help you cut wasteful spending and make smarter financial decisions.
With a clearer picture of your budget, you can more carefully track how much you are saving for near-term goals, such as buying a home, as well as long-term goals, such as retiring by a certain age. Consider using digital tools that allow you to set budget goals for each spending category and alert you when you have met your monthly goal or may be close to exceeding the amount.
- Plan for Future Tax Seasons
Some ease the burden of annual spring cleaning by scheduling deep cleaning days throughout the year. Similarly, tax planning may require your attention at multiple points throughout the year, not just during tax-filing season. Whether before or after Tax Day, it’s never too late to incorporate tax-efficient strategies into your financial plan.
Consider a combination of the following strategies:
- Tax-loss harvesting: Involves selling securities at a loss to help offset taxes owed from capital gains in taxable investment accounts. (Check with your advisor on this as certain rules apply).
- Tax-aware asset allocation: Different kinds of accounts are taxed differently. A tax-aware asset allocation strategy that accounts for those differences may help to increase after-tax returns.
- Tax-favorable investments: Many investments, such as municipal bonds, tax-efficient mutual funds and 529 plans, may allow you to save for a variety of goals while also offering tax benefits.
Regular meetings with your Advisor can help ensure that your efforts today truly reflect the financial future you desire. Sometimes, getting there requires a bit of decluttering and reorganizing—with a little help going a long way. Connect with an Advisor to discuss how you’re tracking toward your long-term financial goals.
Disclosure: The information provided above is general in nature and is shared for information purposes only; nothing herein should be interpreted as investment or tax advice. It should not be assumed that future performance of any specific investment or investment strategy will be profitable. Different types of investments involve varying degrees of risk, but all investments carry the risk of loss, including the permanent loss of principal. Past performance is not a guarantee of future results Any and all tax laws and/or specific tax rates referenced are subject to change.
