Cleaning Up Your Finances
Getting your personal finances in order is a lot like spring cleaning: no one really enjoys it, but you have to get it done. If you haven't paid attention to your finances lately, this to-do list of steps may help you tidy things up a bit.
- Organize the paperwork. Find all your important records, documents, and financial statements and move that paperwork to a central location.
- Dust off your tax strategy. It's always helpful to review your taxes. You may want to get recommendations from a tax professional about ways to improve your tax picture for the current year.
- Set up a budget and stick to it. Make it a priority to deposit a set amount into a savings or investment account every month. Analyze your spending habits and plan ahead for major expenses.
- Spruce up your credit. Transfer credit card balances to lower-rate cards, or pay off your credit card debt and use the money you save on finance charges to begin a regular investment program. If mortgage rates are low, consider refinancing to save on interest payments or reduce your tax liability. Also, think about taking out a home equity line of credit that offers a low rate and tax-deductible interest.
- Think about a total overhaul. You may have reached a new stage of life that requires different investment tactics. Should you rebalance your investment portfolio? What about your life insurance coverage? Consult a qualified financial professional for specific advice that fits your situation before making any decisions.
- Plan for future needs. What is your retirement funding strategy? A 401(k) retirement plan can give you a reduction in current taxable income, an excellent savings plan, and tax-deferred earnings. Many employers also match 401(k) contributions, which further enhances the value of this retirement funding vehicle.
- Protect your home. Review your homeowners' insurance and car insurance policies carefully; there may be adjustments you can make to reduce your premiums without damaging your insurance position. Make a video recording of your home to document your possessions. Store the video in your safe deposit box and update it regularly.