Six Ways To Spring Clean Your Finances

SEP020660Spring is here! And unless you live in California or the deep South, chances are it’s high time to feel the sun on your face for the first time in what feels like decades. It’s also when you feel like clearing away the excess, cleaning up and getting rid of stuff you don’t need so you can head into Spring lighter. Fresher.

Your finances can use some Spring cleaning every bit as much as your home does. Here are six ideas to head into the warm weather with a clean slate.

1. Cleaning out old clothes and basements and attics full of stuff? Don’t throw away useable goods—donate instead. There are plenty of charities that can use your well cared for possessions to help those in need. Just make sure to do your homework and check out the charity first. There are several sites you can use, such as Charity Navigator.  Be sure to follow IRS guidelines for valuation purposes. If you can use the cash more than the donation, use the auction sites or even garage sales to turn all your excess stuff into cash. 

2.  Review your portfolio. Are you holding onto failed stocks or investments that you just can’t seem to come around to getting rid of? Maybe you’re holding onto some vague idea that it will come back, just because you want it to. If so, close your eyes, grit your teeth and get rid of the stinkers. Because while you’re waiting for miracles, you are ignoring the opportunity to make money elsewhere. When you finally get tired of seeing the losers on your statements month after stinking month, you will find their absence a welcome sight. The caveat is this: you have to promise to stop looking at the investment after you lance it. Hindsight bias (“I knew it would turn around”) will just make you plain miserable. Why do that to yourself?

3. Attack denied benefits. Do you have a stack of notices from your insurance company called EOB’s or Explanation of Benefits? It’s where they provide you with a code (or seven) of why they are declining your claim. Well, it’s time to dive right in and make that phone call to the insurance company to follow up on their denials. There’s very likely hard earned money sitting in those forms just aching to make their way to your checkbook. Unfortunately, the insurance company has a vested interest in keeping it in theirs. Prepare by understanding your coverage and then reviewing each EOB to see where there might be discrepancies. Sometimes, all it takes is a phone call followed up by a letter of complaint. Make sure you get the person’s name and ID number with whom you have spoken and ask for their supervisor’s name and ID number.

4. Check your spending. Okay, so now that the year is at least one third over, how do your numbers look? If you don’t have a spending plan (some call it a budget), then make one. NOW! You have to know your numbers. What does it cost you to live—the basics—and what do you spend over and above what you need to live? Decide where the dollars are going that bring you the least amount of satisfaction and benefit. (Note to men: Do not start enumerating the personal care costs of your mate, unless you are willing to endure the same grilling on your spending.) For most people, there’s nothing easier than spending money. So try something new: save first and THEN pay your bills. Decide to take 5% of every paycheck and put it aside. If that works, then up it to 6%, 8%, 10%. Go for it. You worked for the money, you might as well feel good about what you accumulate.

5. Declare the holidays over. If you still haven’t paid off your credit cards from the holidays, it’s time to take some serious stock of what you’re doing and where your money is going. Consider picking up some part time work if trimming your spending plan isn’t enough. Add up the interest costs you’ve paid since December and tell me you feel good about it. Even if your credit cards are low-low-low interest, the money is better off in your hands than with the credit card companies.

6. Stop loaning to the IRS. Tax refund? Congratulations, you are the proud contributor of an interest free loan to the government. Don’t you feel good about that? Kind of takes the glint off that big check, huh? Well, now you know the government’s dirty little secret. First, go change your W-4 form to withhold less tax and then SAVE THE DIFFERENCE each pay period. Secondly, what were you planning with that refund check—vacation? A new car? Wardrobe addition? Listen, it’s your money, but start by paying off debt. If you are debt-free, congratulations. Now look at your emergency fund—is it properly stashed with cash? By all means, enjoy the money, but do it with balance and thought. You can save some and spend some.

Your finances will thank you for the re-fresh. And you might just sleep a little better too.

Happy Spring!