Broker Check

Spring Cleaning for Finances

| June 08, 2021

Spring is coming to a close which means it’s a good time for the annual spring cleaning ritual of getting rid of clutter and tidying up the house. However, now may be an opportune time to tidy up and declutter your finances as well.  Below are a few things to consider to simplify your financial life.

Take a Thorough Inventory

The first step to decluttering is figure out where everything is at currently. Break this up into two distinct parts: your bills and your financial assets. Consider creating a spreadsheet of some type that lists out your monthly bills. Once you feel confident you’ve listed out everything, organize the list in terms of bills of highest priority (rent/mortgage, insurance payments, other liability payments, utilities, etc.) and items that may be of lower priority like subscription services or memberships. Do you have a gym membership you don’t use or a monthly TV streaming service you haven’t watched in months? Consider cancelling unused services or subscriptions to cut down on the number of bills you receive every month. Be sure to also review higher priority bills as well. For example, maybe you’re paying for a data plan on your monthly cell phone bill that you no longer need or you’re paying for a 200 channel cable package and you only watch a few channels. You may be able to slim these bills down as well. Once you’ve taken an inventory of your monthly bills, consider how you pay them. Do you still write a physical check and mail your bill payments? If you are comfortable doing so, you may want to consider automating certain bill payments and paying them electronically to cut down on the chances of forgetting a bill or having it get lost in the mail.

The second inventory we recommend you review are your financial assets (and certain liabilities). How many bank accounts do you have? Do you have old workplace retirement plans? Do you have investment accounts at multiple brokerage firms? How many credit cards do you have? What insurance companies are your insurance policies with? Make a list of everything.

Consider Consolidating

After you’ve made a list of all the financial accounts you have, you may want to develop a game plan to start paring them down. For example, if you have savings and checking accounts at multiple banking institutions, you should review things like interest rates, fees, and overall service and benefits you receive from the banking institution. Before completely consolidating certain bank accounts, be mindful of a few things such as FDIC insurance limits and keeping your business and personal accounts separate. When it comes to investment and retirement accounts, you may want to consider having a financial professional review what you have and explain your options for consolidation (or not). Lastly, before you outright cancel credit cards, consider how doing so may impact your credit score. As we mentioned in a previous article, your overall credit utilization ratio and length of credit history can factor into your overall score. So if you close certain credit cards, your credit utilization percentage may increase (because you have less outstanding credit available) and depending on how long you’ve had the card(s), your overall credit history length could be impacted. Both of these factors may cause a temporary ding to your credit score. You should weigh the costs of keep the card open like on-going annual fees versus the potential ding to your credit score by closing the card.

Go Paperless

If you’ve made the initial step to begin viewing bills, financial, and insurance accounts online, consider updating your paperless settings. Do you want to continue to receive your monthly bank statement in the mail if you view the account and transactions online? Maybe or maybe not. On the other hand, if you have been good about going paperless but your email inbox is full of spam and other non-essentials, then chances are you are likely to miss an important email. If this is you, you may want to consider creating a separate email account that you use solely for emails that are often time sensitive and require immediate attention like those that are financial, insurance, or health care related. Be diligent about keeping this inbox cleaned out and check it often.

Like the traditional “house” spring cleaning, the “financial” spring cleaning can seem to be somewhat of a chore easily put off to another time.  But cleaning out, consolidating, and organizing financial items on a regular basis can make financial decisions easier in the future and hopefully gives you a greater sense of control.

Securities and Advisory Services offered through LPL Financial, member FINRA/SIPC, a Registered Investment Advisor. LPL Financial and Croxall Capital Planning do not provide tax or legal advice.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.