Financial Spring Cleaning

Show Notes

Does your desk or office look like a paper recycling facility? Stacks of paper here, piles there? That disorder may prevent you from managing money wisely. We’ll tell you how to do some financial spring cleaning on this Faith and Finance.

John Wesley is credited with the idea, “Earn all you can, save all you can, and give all you can.”  It’s harder to do that if your financial papers are disorganized.

• START ORGANIZING
• You can start getting things organized by taking all of your stacks and piles of paper and putting them into three categories: Those you don’t need to keep, those you want to keep for seven years, and those you need to keep forever.
• Category 1: Papers you don’t need to keep, go into the shredder. If you don’t have one, buy one that makes crosscuts. It’s worth the small expense to prevent identity thieves from sifting through your garbage.
• Category 2: Papers you want to keep for seven years, will usually be anything related to taxes. Make folders for those and keep them in a file cabinet, another worthwhile expense if you don’t have one.
• Category 3: Papers you need to keep forever, would include marriage and birth certificates, passports, deeds and other documents related to property ownership. Keep those in a fireproof safe or safe deposit box.
• Now that your papers are in order, you can tackle some of the other items on your financial spring cleaning list.
• Do you have 3 to 6 months of living expenses in your emergency fund to cover an unexpected job loss, medical condition, or some other financial calamity? If not, spring is a great time to start or increase your emergency savings.
• You want to keep those funds in an online bank to get the best interest rate, and you can automate the process by having a certain amount taken from each paycheck and put directly into savings. Check your bank’s website for details about automating your savings. That money won’t show up in your checking account balance, and you know what they say— out of sight, out of mind.
• TAXES
• Now, tax season just ended, so it’s a great time to think about your withholdings. If you have too little withheld, you could get hit with a penalty. On the other hand, a big refund means you’re just giving Uncle Sam an interest-free loan with money you can put to better use throughout the year.
• So, how close did the amount you had withheld for taxes match what you owed? If you owed more than around $500, or you’re expecting a refund of that much or more, you need to fill out a new W-4 form to adjust your withholdings.
• This is especially important if you had any major life changes, such as more income or maybe a new addition to the family. You can get a new W-4 from your employer or download one from IRS.gov.
• ESTATE PLANNING
• And speaking of family members, you should also take a few minutes to look over the beneficiary designations for retirement and other financial accounts. If you haven’t made any, now is the time to do it. A beneficiary designation will allow those assets to go directly to the person or persons you name, without having to go through probate.
• INSURANCE
• Your next financial spring cleaning task is to pull out all of your insurance policies, for life, health, home, auto, and anything else. Are they meeting your needs? You’ll have to wait until open season to change health insurance, but others can be changed or replaced at any time.
• For example, are you driving less this year because you’re working from home more? 
• Alert your auto insurance agent of that change, because it could well lower your premiums.
• If you made major purchases or changes to your home, you’ll want to make sure your homeowners policy covers them. It’s a good idea to take pictures from different angles in every room of your house. That way you can show an insurance adjuster exactly what you lost in case of theft or fire.
• For life insurance, check to see if your policy provides a death benefit of at least 10 to 12 times your annual salary. If not, increase it accordingly. And by the way, you want the least expensive term insurance policy. Whole life policies mix insurance with investing, and you’ll always be better off by doing your investing separately.
• SUBSCRIPTIONS
• Okay, one more item on your list— check your subscriptions and streaming services to see what you might be able to cancel.
• You can actually download apps that will review all of your automatic bank debits for apps and show you ones you no longer need. For streaming apps, if you’re not watching them, cancel ‘em. It can save you a ton of money.
• Well, that’s your financial spring cleaning list. We hope you’ll get started ticking off items today.

On this program, Rob also answers listener questions: 

• Will you owe capital gains tax on the sale of a property? 
• When does an annuity make sense in retirement? 
• Do identity theft security subscriptions like “Lifelock” make sense? 
• Would it make sense to take a loan against your retirement funds to buy a tractor? 

RESOURCES MENTIONED:

• FTC.gov
• IdentityTheft.gov
• Experian
• TransUnion
• Equifax

Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.