As the days get longer and sunnier, many of us are inspired to do some spring cleaning. I like to take that tradition and apply it to my financial life.
My husband and I start talking about revisiting our budget. We update our net worth statement. And he usually shreds financial documents we don’t need.
But this spring, what I’m going to do for my financial life is inspired by the struggles I’m having in trying to help my mother, who was critically injured in a fire at her home. As I continue to pull together a financial file for her, I’ve been thinking about some things people should do. In that respect, here are five tips to spring clean your finances:
• Put your important papers in a portable fireproof and waterproof safe. Almost all of my mother’s important papers were destroyed in the fire. She kept most of her paperwork in her bedroom, which is where the fire started. The history of who she was financially largely went up in smoke.
Increasingly, most of the financial information you need can be accessed online as organizations strive to have customers go paperless. But there are some documents you need to keep handy and safe – your Social Security card, passport, certificates of birth and marriage or divorce documents. In filling out paperwork, certain companies may require originals of many of these documents.
You can spend several hundred dollars for a safe, but I found a few I like ranging in price from about $40 to $60. I want something that’s portable and can be carried in a hurry.
• Set up a meeting with the folks who are responsible for taking care of your affairs. Even if you’ve talked in the past, maybe it’s time for a fresher conversation. Don’t just tell them but show them. Point out where you keep your files and your safe, which you’re going to get, right? Also provide a list of the names of important contacts or companies you do business with, such as your insurance agent.
• Create a family history folder. You think you know important information about your family, but do you really? You may know their birthdays, but do you know the year they were born? What about the city or town? That’s the information you’ll need to order a birth certificate or fill out important paperwork. What about marriage and divorce dates? I have two brothers who died but I don’t have death certificates for either of them. Such documents become important if you need to prove survivorship of another loved one.
• Please review and update beneficiary information. Often we fill out such paperwork when we start a job or open up a policy or account of some sort, but then we don’t take the time to make sure it’s up to date. As a young adult, you may have designated your parents to receive retirement money. But now that you’re married or have children, you likely want to leave money to them instead.
Let’s say you’ve prepared a will and named your spouse and children as recipients of your 401(k) retirement account. However, you never changed the beneficiary information on the accounts. Guess what? The beneficiaries you designate on your retirement accounts will trump your will. Also be careful about naming minor children as beneficiaries. And do you have contingent beneficiaries in case your primary beneficiary dies?
• Choose to clean up your financial life. Make a decision this spring to put your past behind you and become a better money manager. Do you know most people are more embarrassed to come clean about their credit card balances and credit scores than their age or weight, according to an online poll by the National Foundation for Credit Counseling?
Find a financial class or workshop that can help fix your finances or strengthen your financial skills. The NFCC has developed a financial education program called “Sharpen Your Financial Focus.” You can get more information about it by going to sharpentoday.org.
It’s become a ritual for a lot of folks this time of year to spring clean their financial life. Join the movement. It may take a lot of time, but your financial life will be healthier for it.