By Stephen Fournier, President, Central New York Market, KeyBank
There is a saying: spring is the time of plans and projects. After a long winter, this generally holds true. The weather is warmer and days are longer. For many, this season of renewal brings with it an urgency to start fresh—to clean out the old and get with the new.
Most of us think of spring cleaning as house and yard work. But have you ever thought about a financial spring cleaning? Taking the time to organize and eliminate unnecessary paperwork and policies, review your budgets and evaluate your income? If not, this should be the year you start.
Enlist help and de-clutter
Just as you take stock of what needs to be done around the house and in the yard come spring, and who can help you get it done, you must also conduct a site review of your financial house. For starters, who is involved in the decision making process? How open with your family are you about the budget and financial strategy? Perhaps it can be more of a team effort and other members of the household can contribute ideas that will help save the family money, reallocate spending and budget with purpose.
As you’re enlisting help and discussing future financial goals, base it on real data. Pull out files and old boxes filled with financial documents. Review and analyze them to ensure you’re still on the right financial path, and weed out what you don’t need. A good rule of thumb is to keep tax records for seven years, pay stubs and bank statements for a year and credit card statements for at least 45 days. Former apartment leases, old bank statements, canceled checks, utilities and accounts no longer in use can be shred. It is important to shred old financial documents so you don’t put yourself at risk for possible identity theft. It also doesn’t hurt to look into old or little-used accounts. They’re like your couch. You never know what loose change you’ll find.
Once you’ve sifted through the reams of paper, organize what remains. If you really want to clear off the shelves, you can scan your documents and store them electronically. Just make sure you have reliable back up or are using a secure and trusted online document storage provider.
Develop a master plan
Hopefully you have recently filed your taxes . . . or will be doing so in the immediate future. If so, everything you need to know about how much money you make and what your basic expenses are can be found in your return.
Knowing how much you made and spent the previous year will help you reevaluate your budget, reduce financial clutter and analyze what expenses can be eliminated. To do this, you should review all plans and policies you have in place. You might be paying more than you need to for certain items or services. For example, can you save money on your phone, cable or Internet expenses by switching plans or carriers?
What about your insurance policies? They shouldn’t be gathering dust. Homeowner’s insurance, renter’s insurance, health care insurance and auto insurance are some of the most-commonly held policies. Make sure you aren’t overpaying or underpaying on them. For example, take an inventory of your possessions by adding up how much it would cost to replace them. Then compare this figure with the amount of coverage in your homeowner’s policy to determine whether you are over- or under-insured. If you’ve acquired expensive, high-worth items, such as jewelry, a boat or artwork, make sure to adjust your policy accordingly. Do you have older children who are still on your health insurance policy? Do they need to be?
What about cars? Do you still need to carry collision? Make sure your coverage meets your needs and your beneficiary designations are current. Research and request quotes from different companies. Find the right fit. And consider bundling policies. It may help you realize some savings.
What about retirement planning? Your financial spring cleaning is also a good time to set up or review your retirement plan. Ask yourself if it still reflects the goals you’ve discussed with your family. Does it aligns with your future needs and wants? Also review estate plans or wills. If you don’t have anything in place, this is the time to do it. You want to ensure you have full control of how your assets are distributed when you’re gone.
Finally, check your credit score. You can get a free report annually from each of the three major credit bureaus (Equifax, Experian and TransUnion) by visiting www.annualcreditreport.com. Make sure your reports are accurate and reflect your current loans and credit lines. And while you’re on the computer, take a few moments to change passwords and organize them. This will help keep your private information private.
Grin and bear it
If you weren’t tired after cleaning your house, chances are you will be after reviewing and spring-cleaning your finances. It’s a lot of work, time and effort, but it’s as important to securing your financial future as fixing a leaky roof is to protecting the stability of your house. And at the end of the day, getting your financial house in order will change your relationship with money, change your relationship with your family and put you on the path of financial independence.
About the author: Stephen Fournier is president of KeyBank’s Central New York Market. He may be reached at either 315-470-5096 or [email protected].
Identify and avoid these budget busters
Budget busters are like invasive species of weeds and grasses. As much as you think you can control or ignore them, they quickly overwhelm. The key is to identify and treat them before they become a problem.
The good news is that budget busters are pretty common and don’t vary much from person to person. So take a look at the following list to see if bad spending habits are creeping into your daily life. If they are, follow the tips to ensure they don’t become a problem.
- Late fees. These fees add up fast but can be easily avoided. Look into automatic debit from your checking account for bill pay. By having payments directly withdrawn from your account, you won’t ever have to worry about a late fee again.
- Impromptu spending. You don’t have to buy something just because it’s on the shelf in front of you. Go home, do some research and sleep on it. Make sure you can afford it and really need it.
- Lack of an emergency fund. It is much easier to pay for new brakes or a water leak if you have an emergency fund. If you don’t have an emergency fund, start having automatic withdrawals from your paycheck put into a savings account. And don’t touch it. Out of sight, out of mind is very good when it comes to savings accounts, provided the account is automatically receiving regular funds.
- Energy inefficiencies. Consider having an energy audit done on your home. It’s going to cost you money up front, but you will likely save money in the long run by making your home more efficient.
- Well-intentioned giving. It’s nice to give. It’s important to give. But there are times when money is tight. Consider donating your time or services.
- Holiday spending. Decorations, food and gifts add up quickly. Try to put a budget in place for all your entertainment and gift expenses. It’s easier to say no when you have a plan.
- Coffee and lunches. Use your coffee maker every day and treat yourself once a week to that specialty coffee. A coffee out each day, seven days a week, can add up to $30 a week. Also, pack a lunch and bring it to work.
© KeyCorp 2016. KeyBank member FDIC.
KeyBank is an equal housing lender Opinions, projections, or recommendations contained herein are subject to change without notice and not intended as individual investment advice.
Opinions expressed are those of the speakers and do not necessarily represent those of KeyBank.
