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Spring Clean Your Finances

Spring Clean Your Finances


It’s spring! The trees and flowers are in bloom; baseball season is in full swing. Spring also comes with those yearly cleaning chores that we sometimes overlook, like cleaning out the medicine cabinet, getting rid of old clothes, and dusting the curtains. Now is also a great time to do some financial cleaning. Here is a cleaning checklist to help you feel financially tidy.

Clean Up Your Money: When was the last time you made a list of all your financial accounts? Do you have an online login for each account? If so, take the time this spring to make a list of all those logins and keep it somewhere safe (not kept on a computer). Better yet, link those accounts in one secure financial aggregator. If you do not log in online, create a binder with all your recent account statements including checking, savings, 401(k)/403(b), Individual Retirement Account, Health Savings Account (HSA), etc.

Clean Up Your Goals: Once you know what you have and where everything is, you can decide what you want. Asking and answering the critical question, “what do I want?” can take time but ultimately will lead to decision-making. Author Napoleon Hill outlined a clear path to wealth in his book, Think and Grow Rich. He recommends determining how much money you want, by what date, and how you will make that money (who will pay you for what good or service you are willing and capable of providing). Write this down and keep it handy. Read this statement morning, noon, and night. Eventually you will believe it and begin to see your plan coming to fruition.

Clean Up Your Spending Habits: A 2020 Mint Survey revealed that most (65%) of Americans didn’t know how much they spent over the previous month. Tracking expenses doesn’t have to be complicated or time-consuming. A simple spreadsheet with a list of your major liabilities (mortgage, insurance, car payment, student loans, and credit card debt) will do. If you use a credit card for gas, utility payments, dining out, and groceries, your credit card company will track and categorize those amounts automatically. Set an appointment with yourself once per month to determine if you are spending more or less than your income minus the amount you want to save. By looking at your credit card statement, you can decide if you can live without anything in order to save more.  

Clean Up Your Income: How much money you take-home each year makes a big difference in your ability to save for your goals and how much you pay in taxes. For those on the line between two different effective tax rates, contributing more to an employer-sponsored retirement plan or health savings plan can reduce your taxable income, thereby moving you from a higher to lower effective tax rate.

If you want additional income in the coming year, make a list of your options. Some possibilities include finding a second job; selling your belongings; making something to sell, or finding a new job with a higher salary.

Clean Up Your Savings: Studies have shown that making saving automatic increases the overall savings rate. People who automate their savings each pay period have larger balances in their savings account than those who manually transfer money each month from checking to a savings account. The mental process of paying yourself after all other expenses leads to lower account balances. It is simply easier to pay yourself first when the process is automated. If you are not saving automatically, talk to your employer about adjusting direct deposit amounts into an account separate from your checking account. You can also set this up through your banking institution.  

Clean Up Your Estate Plan: If you do not have an estate plan (what will happen to you and all your “stuff” after you get sick or die), your job for this spring is to create one. Estate plans are not just for the ultra-wealthy. They are for everyone. Start with a simple will and appoint someone to act on your behalf if you are incapacitated.

For those who already have a basic estate plan, be sure to read “What If You Died Yesterday” about two types of estate plans left for adult children to execute. One plan was incomplete and quite difficult to sort out, the other was thoughtful and organized. We never know when it’s our time to go. Plan wisely.

Like house cleaning, sometimes you want to do it yourself, but it is often easier to hire someone to help. For nearly three decades, the team at Hurlow Wealth Management has assisted clients in Bloomington and Indianapolis, Indiana, in finding clarity, feeling confident, and achieving comfort throughout the financial planning process.  For help getting your financial house in order, schedule a consultation today.  

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