Refreshing Your Finances: A Spring Cleaning Guide

‘Tis the season to think about spring cleaning, not just in our homes but also in our finances. Just like we organize and declutter our living spaces, our financial lives can benefit from a bit of tidying up.

Joel Johnson, CFP® is here on Better Money to share some valuable tips on how to spring clean your finances and set yourself up for a worry-free year.

Get Organized and Eliminate Clutter

The first step is to get things organized. This means discarding outdated wills, trusts, and estate plans. Many people come into our office within three or four years of retirement and still have old wills and trusts that may no longer reflect their current wishes.

It’s crucial to review these documents to ensure they align with your current situation, even if they don’t need updating. They might have been created decades ago when your kids were born, and your circumstances have likely changed since then.

Track Down Forgotten 401(k)s

Another important task is to track down any forgotten 401(k) accounts from previous jobs. While people usually haven’t completely forgotten about these accounts, they might be ignoring them. Often, individuals focus on the 401(k) from their current employer and neglect the smaller accounts from old jobs. However, these accounts still represent real money, which could be equivalent to six months to a year’s worth of income. Simplifying and consolidating these accounts can help you keep better track of your finances.

Consolidate Your Accounts

Speaking of consolidation, this is another crucial step in spring cleaning your finances. By consolidating your accounts, you can reduce the number of accounts you need to manage, making it easier to keep track of your investments.

While you can’t combine retirement accounts with non-retirement accounts, you can simplify your finances by reducing the number of accounts, for example, from twelve to four or five. This makes it easier to ensure your investments are coordinated and working together.

Schedule an Annual Financial Check-Up

Just like scheduling an annual physical check-up, it’s essential to schedule an annual meeting with your financial advisor. If you don’t have one, consider scheduling a free consultation with a professional. As we get older and accumulate more wealth, the stakes get higher, and regular financial check-ups become increasingly important. When you’re in your 20s and 30s, you might not need to visit the doctor as often, but as you reach your 60s, annual and sometimes more frequent visits become necessary, and the same logic applies to your financial health.

By following these steps and taking the time to spring clean your finances, you can enjoy the rest of the year with greater peace of mind, knowing that everything is in order.