Yahoo Finance 3 Ways to Clean Up Your Finances This Spring
As the weather gets warmer and the snow finally melts, many people will begin their annual spring cleaning. In addition to it being the perfect time to dust off your bookshelves and clean out your closets and garage, now is a great opportunity to take a look at your finances and create a plan for the year -- and years -- to come.
The Voya Retire Ready Index study, based on two surveys in July of more than 2,000 adults, found that fewer than one in five workers (17 percent) and only about one-quarter of retirees (26 percent) have a written financial plan. Additionally, only about one-third of workers (31 percent) and retirees (35 percent) have a comprehensive budget.
These three steps can help you to create a plan that will tidy up your finances for spring and set you on a path to retirement readiness:
1. Take inventory. Before you can make any sort of plan for the future, you need to assess your current financial situation. Pull together your latest statements from bank and savings accounts, personal investments and all insurance policies. Be sure to also look at any outstanding debt you may be carrying from credit cards, mortgages or other loans. This inventory check will help provide a complete view of your finances so you can determine which areas need to be a priority for the coming year.
Going through financial records can be overwhelming, so consider using an online tool or meeting with a financial advisor to help you streamline the process and stay organized. If you find yourself looking at an intimidating stack of papers, try going digital. You can contact your financial advisor, bank and credit card companies to begin receiving statements electronically, giving you the ability to file them away digitally and save yourself from dealing with so much paper clutter each year.
Lastly, in addition to taking financial inventory, look into any untapped or underutilized workplace benefits. Check with your employer about whether you are maximizing your retirement savings accounts, insurance coverage, financial advice services, flexible spending accounts, health savings accounts and more. There are a variety of valuable workplace benefits available for Americans today, and some research can help you uncover new options to help improve your financial security.
2. Consolidate accounts. Over the years, it has been common for investors to accumulate numerous bank and savings accounts. When you move from one city to another, you may open an account with a bank that is more convenient. Or after securing a new job, you may become enrolled in a different 401(k) plan. Having many separate accounts, however, runs the risk of exposing you to added costs and complications.
If you have more than one bank account, look at each provider to determine if any offer no-fee or low maintenance fee accounts. Then, consider consolidating. Try to reduce the number of credit cards you have, particularly if you see that one of your cards has an exceptionally high interest rate compared with the others in your wallet. If you have more than one retirement account open from various past employers, consider your options, which include rolling your old accounts into your current 401(k) or individual retirement account.
3. Review your credit. Credit card debt is a major concern for many Americans today. According to the Voya study, 39 percent of working U.S. adults felt they had a high level of debt. Therefore, an important part of your financial spring cleaning should include assessing your current lines of credit.
First, check your credit score. There are online services that will pull your reports from the three credit bureaus (Equifax, Experian and TransUnion). If you see any discrepancies, report those right away. Once you have your score, evaluate the different cards you are currently using, keeping a close eye on interest rates.
Finally, and most importantly, if you are carrying a significant amount of debt, now is a good time to set a plan to begin to pay that down. Start with the debt that has the highest interest rates, and try to chip away at it each month with regular payments. Tackling debt can be difficult, but by sticking to a regular payment plan, you will be able to see a difference.
Now that you have a picture of where you stand financially and have taken some important steps to get organized, it's time to look toward the future. By determining how much money you are on track to have saved for retirement, you will be able to better tailor your savings strategy. Online retirement calculators can help you see how your savings today will translate into income tomorrow.
As part of your cleanup, figure out where you stand, meet with an advisor and create goals. Spring cleaning can be a tedious task, but by taking the time to focus on your finances and create a plan, you'll be setting yourself up for a more secure future.
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