How to Detox Your Finances This Spring

Posted by on Apr 19, 2016 in Articles, Uncategorized

Spring is one of my favorite times of the year. The weather is warmer, which means my daughters no longer have to look like Ralphie’s younger brother from the movie A Christmas Story. This also means that I can’t hide indulgences in chocolate and comfort foods during the winter behind big sweaters.

Our family tradition is to do a cleansing of our bodies and home to welcome in a new season. As I was talking about this to a girlfriend over ice cream (O.K., the cleansing will start next week), she mentioned that she wished she could do this for her finances. Here are some financial areas I suggested may be due for a cleansing:

Documents. Do you have a section in your closet that looks like a paper version of Cousin Itt? Use this cleansing period to rid yourself of the stress of piles of unidentifiable papers that keep growing. Use the following guidance as a general rule for keeping records:

  • Sales receipts- Consider attaching your sales receipt to your warranty and discard when your warranty expires. If you do not have a warranty, consider keeping your receipt until your date to get a refund and/or exchange expires.
  • Paycheck Stubs- The rule of thumb is that you can get rid of them when you have compared the stubs to your W2.
  • Tax Return- The conservative guidance is to keep the records forever. Others say seven years. The more complex your tax returns are, the longer they should be kept.
  • Healthcare Statements- Keep until you have verified that the bill has been settled.

While you are purging records, you might as well get them organized:

  • Consider getting a fireproof safe or safe deposit box for important documents like marriage certificates, birth certificates, passports, property insurance information, and estate documents like a will and powers of attorneys. Make sure the executor of your estate actually knows where your documents are located.
  • For those that have fully embraced the digital age (I am Generation X and I will admit that I am not quite there), consider storing your documents digitally.

Expenses. If your wallet is like a black hole (money seems to disappear the second it connects with you), then it may be time to do a spending cleanse. If you are not sure where to start, consider this list:

  • Eating out. Eating out is the ultimate black hole of most budgets. If you spend $10 on lunch and cut out lunch twice a week, that could add up to $1,000 a year that could go toward a financial goal like a starter emergency fund or paying down debt. If you must eat out, consider downsizing the meal – water only, appetizer or cheap entrée with no drink. If you are with a friend or significant other, consider splitting a meal. Your wallet and your waistline will thank you.
  • Cable TV. It never fails to amaze me how some people will work 70 hours in a job they hate to pay for a $150 cable package that they are too tired to watch. Consider streaming devices like Google Chromecast, Apple TV, Amazon Fire TV or Roku to cut the cable cord and stream TV and movies through services like Netflix, Hulu, and Sling TV so you won’t go into television deprivation.
  • Cell Phones. Contact your cell phone provider about discounts on your cell phone package.  Another consideration is to use Tier 2 carriers such as Cricket, Metro PCS, Boost or Straight Talk that sometimes work with the same cell phone towers as some of the bigger carriers like AT&T, Sprint, T Mobile and Verizon, but at a fraction of the cost.
  • Utilities. Utility companies are becoming deregulated, which means you may be able to shop for the best price and take advantage of offers to switch companies. Research your options to make sure your carrier provides the best value.
  • Tax withholding. Another good place to cut expenses is to stop giving Uncle Sam a no-interest loan. If you got a tax refund, considering using the IRS withholding calculator for guidance on how many allowances to claim on your W4 to help you break even.

Credit Report. When was the last time you checked your credit report to make sure there is no toxic information that can wreck havoc with your financial life? Get an annual free credit report from all three reporting agencies from annualcreditreport.com. Once you get your credit reports, review them for toxic information using checklists like this one from Nolo. If you find errors, you can dispute them online.  As you review, pay close attention to the following:

  • Review your personal information to make sure all of your information is correct: name, Social Security number, marital status, etc.
  • Review your account history to make sure it is accurate

Investments. I often tell people that a buy and hold investment philosophy does not mean buy and ignore. Flush out the areas in your portfolio that may be hindering your investment performance:

  • A rule of thumb is to have no more than 20% of the total portfolio in any one stock. If you are higher, talk to your investment professional about reducing your holdings.
  • An article in U.S. News and World Report cited that mutual fund fees could cost an investor thousands of dollars over time. Purge your portfolio of high fees by using websites like FINRA’s mutual fund analyzer to estimate the impact of fees and expenses on your investments. According to Morningstar’s 2015 Fee Study, the equal-weighted average expense ratio for all funds in 2014 was 1.19%. Do the fees you are paying match the quality of the investment you have and the level of service you are receiving?
  • If you have so many investment accounts that tracking them can almost form a map of the U.S. then it may be time to consolidate your investments in one place. Not only will it make it easier to review your investments but getting fewer tax documents may make tax season a lot easier for you.

Don’t just think of spring as a time for spring cleaning. Use it to cleanse yourself of anything that may be getting in the way of you achieving your financial goals. Your future self will thank you!

http://www.forbes.com/sites/financialfinesse/2016/04/17/how-to-detox-your-finances-this-spring/#47298cf87a10