Spring is officially here. The spring equinox occurred on March 20, when the sun crossed the equator line, heading north, resulting in increasing daylight hours and warming temperatures. With these changes, many things happen! Flowers start popping up, and trees begin to bud. We see more baby animals and greener grass. It is a season of rebirth and renewal.
Historically, spring was when homemakers cleaned the winter coal soot off their homes’ wall coverings and fixtures. Often, a deep clean on the inside of the home reflected the freshness and restoration of the season outside. When the weather finally changes and the birds start chirping in the morning, I get the desire to throw open all my windows and clean and refresh our home!
Spring also brings April 15, National Tax Day, which brings the end of tax season. With the crazy gas prices and the ever-climbing inflation rate, finances are on most of our minds this time of year. In addition to traditional “spring cleaning,” this time of year is a great time to also “spring clean” your finances. It is an excellent financial practice to review our budgets, goals, and retirement savings yearly and what better time to do it with this change of the season.
Here are 5 steps to spring clean your finances:
Step 1: Organize
Create an organized filing system for your financial records. This system can be in any form that is easy for you to use (i.e., binder, filing drawer, or virtual). You will need to include your bank and investment accounts, retirement and pension benefit plan documents, mutual fund and brokerage accounts, insurance policies, credit card accounts, and children’s accounts.
Other useful information to collect and include are a directory. You can include immediate family and friends for a personal directory and a professional directory with contact information for attorneys, accountants, doctors, and a funeral director. Add your personal and financial goals, yearly and monthly budgets, a household inventory, tax information, and essential documents, including birth and death certificates.
Step 2: Get a Copy of Your Credit Report
Knowing what is in your credit report is vital to your financial health. The information it contains will determine the interest you pay on your auto loans and your mortgage, the amount you pay for your insurance, and even whether or not you are a good candidate for employment. You also need to check your credit reports, at the very least yearly, for fraud or to see if someone is using your identity.
An amendment to the Fair Credit Reporting Act allows consumers to check each of the three credit reporting agencies once each year. Many websites claim to offer these free reports, but the only official site where you can get them at no cost is at www.annualcreditreport.com or to call toll-free at 1-877-322-8228. Get at least one of your credit reports each spring. Correct any errors and do what is necessary to improve your credit score (e.g., pay down debt and increase your savings). For more information, visit www.ftc.gov.
Step 3: Review and Update Your Insurance
If others depend on you financially, it is crucial to have life insurance coverage for income replacement. Life insurance can help cover cash needs at death and can also be used as an estate planning tool or a charitable gifting tool. Disability insurance, which provides benefits to the insured person when they cannot work because of an accident or illness, may be a critical need.
Other important types of insurance include healthcare, homeowners or renters, auto, and long-term care. Reviewing your insurance requirements is a crucial step to take once a year, as life experiences and life changes force you to keep up with these needs.
Step 4: Update or Get a Will
Wills are another basic form of financial protection that some people overlook. A will is a legally enforceable declaration of your wishes regarding how you would like your property to be distributed after your death. It is imperative to have a will if you have minor children. For example, you will most likely need to name a guardian.
You can change or revoke your will at any time. If you already have one, revisit it each spring to ensure that it reflects your current wishes. If you are writing a will for the first time, work with an attorney because wills can be complex.
Step 5: Build an Emergency Fund
Utahns and people across the nation, regardless of low income or those with high incomes, individuals, couples, and families live pay-check to pay-check. Creating an emergency fund will protect you against financial crises such as an extended period of unemployment or a long illness. It will also allow you to pay for the needed car repair without putting it on credit or getting to a short-term, high-interest loan at the corner quick cash loan dealer. Your emergency fund should consist of about 3 to 6 months-worth of living expenses. Invest the money in a liquid asset, such as a money market mutual fund or a short-term bond mutual fund, so you can access it quickly if an emergency should arise.
So with that, add your finances to your spring cleaning to-do list, and for more resources and support from USU Extension, visit https://extension.usu.edu/finance or contact Callie at [email protected].
– by Callie Ward – USU Extension
Feature image is a stock photo.