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Created: April 30, 2023
Modified: April 29, 2023

Financial Spring Cleaning

Today, we will discuss financial spring cleaning and the importance of organizing your finances and important documents. Many of us tend to accumulate things over time, so it’s important to periodically declutter your home office and drawers. Similar to the junk drawer in our kitchen, we tend to have a financial junk drawer filled with various items. Occasionally, cleaning out our financial records is necessary for our peace of mind, much like organizing a messy drawer. Today, we will discuss the significance of experiencing a sense of relief and organization in one’s financial life by minimizing clutter and eliminating sources of disorganization.

Go Digital with your Financial Statements and Receipts

Nowadays, with the abundance of digital resources, we no longer need to keep physical check ledgers or financial statements for as long as we used to in the past. I remember my dad had drawers filled with financial statements from the past 10 or 15 years, but it’s not really necessary anymore since we can access most of our records online in a secure way.

At my house, we have investment accounts with Fidelity. Although we receive paper statements, I suggested going digital and discarding old statements. My wife insists on keeping all of them and we have accumulated drawers full of statements from the past 10 years in our home office. It seems unnecessary since we can keep those records digitally. Many larger institutions, whether it be a bank or or investment firm, have a number of different ways to access your information should there be any kind of a situation where a server goes down, so I don’t think that’s necessary at all.

I also don’t think you need to keep all your receipts. My father-in-law did this and when he passed away he had literally a room in his house full of every receipt going back 30 years. This is not a necessary practice anymore. You do not need to keep receipts if you have used a credit card or a debit card because you can access them digitally. For payments made using electronic check or similar methods, the service providers keep the records, so you do not need to keep the receipts.

How Long Should you Keep Past Statements and Tax Returns?

We can declutter and get rid of items such as financial statements and bank records, but what about past statements and tax returns? According to the IRS, you should keep records from past statements and returns for three years after filing your tax return. If you file for an extension, the clock for the three-year period starts ticking from the point you filed. If you are a business owner, or if you have claimed casualty losses on your tax returns, it is necessary to maintain records for seven years. But again, you don’t have to keep paper records that take up space in your house. They can be stored in digital form.

Financial Documents Worth Discarding

Outdated Wills, Trusts and Estate Plans

To avoid potential confusion or someone incorrectly presenting an outdated will, it’s important to discard any past wills you may have. This can ensure that your wishes are properly executed if something were to happen to you.

If you have any old trusts, please discard them. Similar to wills, keeping them may result in someone submitting the wrong document and causing issues in the processing of our assets after we pass away. We have updated our estate planning as a family three times and all of our old paperwork ends up sitting in binders collecting dust and no longer serving a purpose.

One of the best ways to declutter your life going forward is by redoing your estate plan. If your wishes or circumstances have changed since creating your original estate plan, such as having grandchildren you didn’t have before, or your feelings towards how your children spend money have changed, it’s important to update your plan accordingly. And when you do that, get rid of your old estate plan.

Social Security Estimates

You can also get rid of any outdated Social Security estimates. If I pass away before my wife, Wendy, which statistically will probably happen, and I’ve got a bunch of obsolete records laying around, she’s going to end up bringing all that stuff in to our financial advisor, which is my firm since I am a managing partner here at Johnson Brunetti, and that person’s gonna have to sort through all this old stuff. So, get rid of old statements on Social Security and make sure you have the most recent one.

Track Down Forgotten 401(k)s and Pensions

When it comes to decluttering, you may come across old 401K statements or pensions that you may have forgotten about. These accounts may be small and you may have put them off to deal with them later, especially if you’ve moved and they didn’t have your current address. In some cases, these accounts may have been turned over to the state, which can make it difficult to track them down. Try to make a list or an inventory of old accounts and so on. The main goal is to simplify and create a sense of order. When we have a more organized space, it brings a lot of inner calm.

Consolidate Accounts

It is important to consolidate all of your accounts. We have folks come to us after seeing us on various platforms such as YouTube, television, radio, or our podcast, asking for a financial plan and they’ll have multiple 401(k) accounts, IRAs, and their partner/spouse may have additional 401(k) accounts. We create a financial plan for them that may include up to 15 accounts when it only really needs four. To declutter from that standpoint, consider getting rid of extra accounts. Simplification is important, and there’s a quote about how genius is in simplicity. Find ways to simplify things.

Consolidating accounts makes things a lot easier to get a financial picture of your situation and quite frankly it’s a lot easier for your your financial advisor to manage. Consolidate all your accounts, even the smaller ones. For instance, if you have an account with $80,000, don’t ignore it just because it’s smaller than your other accounts, such as your 401(k)with $800,000 or your partner’s 401(k) with $600,000.

The Right Advisors for You

You may want to consider reducing the number of people from whom you seek financial advice and focus on a select few. Some folks come in to take advantage of our second opinion service. They may be receiving advice from several sources, such as radio programs, family members, or even TV shows, which can be confusing and overwhelming.

Find a couple people you trust and get rid of the rest. Retirement can bring a great sense of ease and simplicity to life, especially if you have planned and organized your finances well. Even wealthy people with top-notch financial advisors often choose a simple approach to make their retirement worry-free. In my opinion, you should not be obsessed with your money as you get close to retirement or as you get into retirement. Rather, you should view your money as a tool to enhance your life and focus on enjoying it.

As the managing partner of a financial advisory firm, I know it may seem counterintuitive, but I believe that in retirement, money concerns should be low enough on your priority list that you don’t have to worry about them. You can achieve this by decluttering your financial and working with reputable financial advisors.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

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