5 Ways to "Spring Clean" Your Finances

Summer break is about to begin.  This is the point in the year where I have two months off, and when my "Spring Cleaning" frenzy begins.  I know it's not Spring, but it's when I have time to do a massive overhaul in my home.  I make donation piles, recycle piles, "sell it" piles; I clean, organize, and rearrange.  When I take care of things I had been previously neglecting, I feel great.  I feel like I am in total control of my environment.  I feel like a strong, powerful person.  That being said, there are some relatively easy things that get neglected in our financial lives, that could use a little a little housekeeping as well.

Here are 5 Ways to "Spring Clean" Your Finances:

1.  Check your beneficiaries.

Life events happen, and it's frequently forget to update our beneficiaries.  This relates to banking accounts, insurance policies, investment accounts, retirement accounts, etc.  For example, do you really want your ex-husband (or ex-wife) to be the one to inherit your house or 401k if something should happen to you?  Likewise, would you want to leave your long-term without a dollar to their name or a home because you forgot to take your brother's name off the beneficiary section of some paperwork?  If you have the paperwork filed away somewhere, that's great.  Otherwise, it's a quick phone call away.  Just call the financial institution, insurance company, etc. and ask them to look up the current beneficiary of your account(s).  If you need to make any changes, they can send you a form.  It's as easy as that.

2.  Rollover your old 401k.

It's hard to know what you have when it's all over the place!   It's time to dig out the old statements you've been getting from those various investment firms, and deal with them. Besides, you'll likely have better options moving out of the old company's retirement plan, and into an IRA.  If you already have a traditional IRA set up, you can roll the funds over very simply.  You just fill out a roll over form.  If you don't have and IRA yet, you will need to open one.  You can do this online at any discount brokerage firm. Remember, if you contributed to your 401k using pre-tax dollars, you will roll it into a traditional IRA.  If it was a Roth 401k (meaning you had the taxes withheld already), you will roll it into a Roth IRA. For those of you that cannot find those old statements, a quick call to the HR department of your former company should get you moving in the right direction.

3.  Review Insurance Policies.

Assuming you already took step one, you should have your beneficiaries squared away.  However, there are other things you should check.  First off all, you need to be prepared to check on all of the various types of insurance you have:  renters, car, home owners, life insurance, etc.  Make sure you have the appropriate level of coverage for your situation.  Also, for types of insurance that come with a deductible, double check what exactly that deductible is, and adjust as needed.  While you're at it, you could go the extra mile, and see if you qualify for any rate reductions or discounts.

4.  Check your Overdraft Protection.

Either visit or call your bank or credit union.  Find out if you even HAVE overdraft protection (ODP).  Overdraft protection is when the bank or credit union transfers money from one of your other accounts in order to cover any check or debit that you didn't have funds to cover from your checking account.  While that shouldn't be happening to you, the truth is that we all make mistakes, and I don't know about you, but I sure want my check or debit to be honored and paid when it hits my account.  If you don't have ODP, and you are short on funds one of two things will happen.  Either the check or debit will be paid, your account will be drawn negative, and you'll be charged a fee (usually pretty high, close to $40 even), or the check or debit will be rejected, and the person or merchant won't get paid (embarrassing and potentially costing you a fee on their end).  If you set up overdraft protection, the bank or credit union just moves your money around for you and charges a much smaller fee.  My credit union takes the money from my credit card and doesn't charge me any fee at all.  I just have to pay the interest that collects on the card.  Since this rarely happens, and I pay it back as soon as I catch my error, this typically only costs me a few cents.  If my credit union transfers the money from my savings, they charge me $5.  This is still better than the near $40 for an NSF fee (non-sufficient funds).  So, your job is to say "Do I have ODP? " if not get it, if so continue with "Where will the money come from if my ODP kicks in? What is the fee for it?"  Then, you make any adjustments necessary taking into account minimizing fees, and making sure the appropriate people in your world get paid.

5.  Review your Budget.

You did a great job of creating a budget using the 50/30/20 Budget System, but you realize you need to adjust your categories to account for something you hadn't previously, or to adjust for that credit card you paid off and no longer owe.  Take a look at the budget.  This is a living, breathing, and ever-changing document.  Make sure the following items are still relevant and up-to-date:  categories, goals, and dollar amounts.  You may need to add or subtract categories.  You may have recently added a new goal, and your budget needs to reflect that change.  Also, make sure your dollar amounts assigned to each category make sense given your current scenario.

Just try to complete one of these tasks per day, and in one week's span of time, you will feel great about your newly cleaned financial house!