It’s the late stages of winter and the tulips are starting to emerge and the days are growing longer. I am starting to feel the pull of yardwork that needs doing and noticing areas that need decluttering. That means it must be about time for some Spring Cleaning!
Past the holidays and before the craziness of summer activities kick in there is a window of relative calm (unless you are a tax accountant!). This is a perfect time to knock out some Spring Cleaning. But did you know that you can do Spring Cleaning for your finances too?
Adjust Your Tax Withholding
The taxman cometh! April 15th is a lot closer than you think so you better get your taxes filed. Look through your tax return and evaluate whether you should make changes to your withholdings. Did you end up owing a lot? Are you getting a big refund? Ideally, you should be as close to $0 owed or refunded as possible. If not, then you should take a close look at altering your witholdings to narrow the gap.
With all the tax changes in 2018 we were nervous that we would end up owing big time, so we increased our withholding. However, when we filed our taxes this year, we ended up with a big refund. As a result, we just decided to reduce our withholding which should give our paychecks a little boost throughout the year.
Check Your Bills and Cancel or Renegotiate Your Subscriptions
It’s a good time to go over your monthly bills to see if everything is as it should be. Billing inaccuracies happen. I have a friend who once received a water bill for over a thousand dollars! Also, make sure you still want things you are paying for!!
Learn from my mistakes: I used to have satellite radio in my first car. When I traded it in for a truck, the new ride also had satellite radio. I incorrectly assumed the old satellite subscription had lapsed. In fact, I ended up paying for two subscriptions for over a year!
Call your internet provider and see if they can give you a better rate. One 10 minute call with ours netted us $15 a month in savings last year. Negotiate with your cable provider. Check out streaming options or cut the cord all together if you don’t like what they have to say!
Re-Quote Your Insurance
If you have been with your carrier for more than a couple years, it’s likely that your premiums have crept up. Additionally, if you have been building your emergency fund, you may be able to increase your deductible resulting in a decrease in your premium. Call around and get a few quotes.
We did this last year and we will be saving over $700 in premiums each year.
Bump Your Savings
It’s still early in the year. A small boost in savings can go a long way. Be sure to pay yourself first! Plan out your savings goals and adjust your budget.
What about all those savings accrued from reduced insurance premiums and lower negotiated or canceled subscriptions? Roll them into additional monthly savings contributions. You won’t feel the sting because you weren’t relying on that money anyway!
Consolidate Accounts
Over the years you may have opened a number of savings accounts. It can become cumbersome to keep track of them all. Oftentimes, savings accounts have minimum balances. This can lead to two situations, neither of which are desirable: 1) The required minimum balances may force you to keep money in savings accounts with very little interest. 2) You could incur monthly fees for not meeting the minimum balances.
This is on our Spring Cleaning list. Last year I noticed monthly fees being charged to two older savings accounts because the balances fell below the required minimums. Since we weren’t putting money into these accounts, I just didn’t play close attention to them. By closing down these unused savings accounts we should be able to transfer the funds from accounts with 0.03% interest to 2% interest. Or even better, we could put this money into the market since it isn’t needed to keep a minimum balance maintained.
Plan Out Your Credit Card Rewards Strategy
Credit card rewards are a great way to earn free or discounted travel, or cash back. In particular, the sign up bonuses can drastically increase your reward points.
However, it is very important to have a strategy in place to ensure you meet the spending thresholds to obtain the bonuses. If you don’t plan this out you could either miss the bonus or be forced to spend beyond your normal habits. Spending more than normal can result in you carrying over a statement balance which can incur interest charges… this defeats the purpose.
So think ahead to the trips you have in mind and lay out which cards you plan to open and when. When you have enough lead time you can plan opening a new card around large upcoming expenses, like home improvement projects, Christmas spending, etc.
Move your Investments
Are your investments tied up in accounts with high expense ratios or assets under management fees? Do you have a 401k or similar from a former employee that hasn’t been rolled over? It may be in your best interest to move these accounts to benefit from lower fees and gain more control of your investments.
We did this last spring when we rolled over our Edward Jones accounts to Vanguard and you can read about that process here (Part I and Part II).
Rebalance Your Portfolio
The market booms and busts throughout the year. As a result you portfolio can get out of whack with your planned allocation. A bull market can leave you with less bonds than you want, while a bear can make the opposite condition a reality.
The selection of an asset allocation is a very personal decision factoring in your risk tolerances and future plans. So it makes sense to take the time and make adjustments as necessary to restore your allocation. You can sell bonds to buy stocks, or vice versa.
Perhaps an easier path, and one with less potential tax implications, is to shift your future contributions to gradually return the balance to your preferred ratio. As an example if you were heavy on bonds you could redirect monthly contributions to purchase more stocks.
This is what we are doing. We are a ways off from reaching Financial Independence, so we are comfortable with volatility in our accounts. As such, our allocation is very stock heavy. However, years ago, when we didn’t pay close attention to this, we ended up with a sizable bond position. As a result, we are pouring all of our current investment contributions into low cost total stock market index funds.
In Summary
I think most people will find there is something on this list that applies to them. So what is on your Financial Spring Cleaning List? Get after it this Spring and reap the benefits over the rest of the year and beyond!
