For many Americans, this winter has been unusually cold and icy, so spring’s official arrival comes not a moment too soon. Springtime is traditionally the season for clearing out clutter, but it’s also a good opportunity to get a handle on your spending and saving. As you’re collecting tax paperwork and year-end statements, “this is a great time to take all this together and say, ‘What do I have and what direction am I going in?’” says Jeff Duncan, CEO of Duncan Financial Management in St. Louis.
Here’s a look at strategies for gauging your financial well-being and taking steps to improve it.
1. Review your budget. You may have set savings goals at the beginning of the year, but with the first quarter nearly over, now’s a good time to tweak your budget if needed or get things back on track if surprise expenses have popped up. Or perhaps you have more money than expected and need to decide how to allocate those funds. Wendy Weaver, a certified financial planner and portfolio manager at FBB Capital Partners, which serves Maryland and Virginia, suggests rewarding yourself with part of that money. "If you've gotten a raise or a bonus or a tax refund, go ahead and spend a little bit of it on something fun like [a] vacation and take the balance of it for savings or paying off debt," she says. "But make sure you’re regularly saving to your emergency fund and retirement accounts."
2. Shred old financial documents. In addition to cleaning out your attic or closet, purge the financial documents you no longer need. “There’s a huge sense of accomplishment to throw things out or shred them,” Weaver says. The Internal Revenue Service website has guidelines on how long to keep documents. In general, most tax documents should be stored for three years, but if you did not file a return or you filed a fraudulent return, the IRS suggests keeping those records indefinitely. Weaver suggests filing bank and credit card statements electronically rather than keeping paper copies but saving originals of important documents such as birth or marriage certificates, divorce decrees and receipts for large purchases. Shred any documents that contain sensitive information like account numbers or your Social Security number to prevent identity theft.
3. Automate savings and bill payments. Avoid late fees by using online bill pay, suggests Susan Tiffany, director of personal finance information for adults at the Credit Union National Association. “Set up a low balance alert [for your bank account] so you never get caught having to pay an overdraft,” she adds. If you’re employed with a steady paycheck, you can also automate savings by setting up automatic contributions to a retirement or regular savings account each pay cycle. Even with automatic payments, it’s still a good idea to review your statements manually to make sure you don’t get overbilled or charged for subscriptions you thought you canceled. So-called “grey charges" cost U.S. credit and debit cardholders more than $14 billion in 2012, according to BillGuard, a Web and smartphone app designed to flag these charges.
[Read: How to Stop Grey Charges.]
4. Check your credit report. Recent data breaches have, for many consumers, reinforced the importance of looking for signs of identity theft. Some credit card issuers now give cardholders free access to their credit scores, while several retailers have offered free credit monitoring to consumers affected by the data breaches. Even so, you should still be vigilant about checking your credit report to see if it contains any inaccuracies or red flags like loans or credit cards you don’t recognize. “Set it up on your personal calendar so you have a reminder to check with one of the three credit bureaus every three months,” Tiffany says. “Look for anything that's amiss.” It can take some time to get errors corrected or removed, so report them as soon as possible to avoid problems when you're applying for a job, mortgage or car loan. "If you're a victim of identity theft, the faster you get on it, the better you can prevent any damage from impacting you," Tiffany says.
5. Talk to (or find) a financial advisor. If you already have a financial advisor, check in with him or her about any changes to your financial goals. "People who have not had a portfolio review in the past year or two should see how well-balanced they are and see if they should be making any changes in their portfolio," Duncan says. Don't have a financial advisor yet? Duncan suggests asking around for recommendations and interviewing two or three to find someone who fits your needs. "You always have to ask, 'What is it going to cost me to use your services?'" he adds. If the advisor is paid on commission from investments or insurance products, that may create potential conflicts of interest, so many people prefer working with a fee-only financial advisor instead.