Are your receipts scattered about your home and statements piled high on your desk?
Spring is the season that we typically clean, organize, and purge our home of excess things. It also coincides with tax season as we begrudgingly sort through receipts and statements while gathering data for our annual returns.
If the paperwork is piling up, spend some time organizing the family finances now while they are top of mind.
Where do you begin?
- Start by making a monthly payment schedule that includes company names, due dates, and amounts due. This schedule should include estimated taxes, property taxes, insurance premiums and other relevant information. Use this as a resource to help with budgeting and planning for large expenses.
- Establish recurrent electronic billpaying through your bank for the mortgage, insurance and other predictable expenses. Keep all bills that arrive by mail, such as property tax and insurance premium notices, in a designated location until they are paid.
- Schedule time to pay your bills either weekly, biweekly or monthly. Read each statement to review for accuracy, pay then file — or throw it away. For guidelines on what to keep, look at IRS Publication 17, page 16, at irs.gov.
- Implement systems to help you manage and save your important documents such as a manual filing system, three-ring binder, electronic scanning and storage, phone app, or a combination of a few methods.
- Invest in a good shredder to destroy statements and other mail with sensitive personal information to protect against potential fraud or identity theft.
- Open a safe deposit box or purchase a fireproof safe to store important documents such as birth certificates, marriage license, deeds, automobile registrations, estate planning documents, and passports.
Prepare a budget
Begin by using the monthly payment schedule referenced above to identify most monthly expenses. Add to the list all additional discretionary expenses in a month.
A budget should record all your purchases, ranging from coffees at Starbucks to large annual expenses such as property tax. This will help you create a spending plan and a transparent snapshot of how you spend money. This tool should help you live within your means by tracking all spending and with planning ahead for short- and long-term goals.
Once your budget is outlined, identify the changes you can make to reduce spending and debt. In addition to managing the outflow of cash, determine how you can increase savings.
Consolidate, consolidate, and consolidate
Do you have more than one checking, saving, retirement, or brokerage account? Do you need more than one of each account? Simplify by consolidation. It will save you time by eliminating the need to review and file the statements for the excess accounts.
Don’t forget about the credit cards. If you can’t easily consolidate or close cards because of outstanding balances, then review the debt and interest rate of each credit card. Organize this data in a spreadsheet, including balances, payment due dates, and interest rates. To eventually close excess cards, focus on paying off the cards with the highest interest rates or lowest outstanding balances first.
Review your beneficiaries
When was the last time you reviewed the beneficiary designations on your retirement accounts and life insurance policies? Even if you have not had any significant life changes such as a death, divorce, marriage, or birth, you should periodically review these designations.
Mortgage
Review statements so you know the balance, interest rate, and remaining term of your home loan(s). Does it make sense to refinance or make accelerated payments to pay off the mortgage prior to retirement? Know your options.
Communicate about finances
Plan time to talk to your partner about your finances, either monthly when reviewing the budget, semi-annually or annually. Be sure to talk about income, expenses, savings, debt, and short- and long-term goals. Is your net worth growing or shrinking? Financial reviews are critical to addressing where you are now financially and to make adjustments to stay on track for the future.
