Financial Spring Cleaning


The weather is improving, and it’s time to clean up the clutter that has built up throughout the Winter.


One thing that is often overlooked, is taking care of the clutter that has built up financially.

There are statements for every account and loan we have. Tax return documents that still need filed. And unknown quantities of investment prospectuses and legal documents stacked in the corner.

If your financial situation sounds similar, here are five good areas to clean up.

small-web-Green-Tree.jpg1. Financial Statements
One question we hear over and over from clients is this: “How long do I have to keep all of this stuff?” As we’ve covered before, there are easy ways to reduce the volume of mail you receive. Cutting down on the physical mail is a start, but even digital copies can grow out of control. For financial related mail, here is what we recommend:

401k plans, IRA’s, and bank statements – Keep each statement throughout the year, but only permanently save your year-end statement. This way, you can reconcile throughout the year, but also have an annual snapshot of your holdings that doesn’t take up much space.

Investment accounts – anything that shows what you paid for an investment should be saved under the guidelines of step 2.
2. Tax Documents
Along with the arrival of spring, we also have to deal with the arrival of tax season. If you felt like you were losing the battle with statements, it’s likely that your tax return files are thicker than you’d like. What do you do with the years and years of filings?

Well, this is one area the IRS provides some concrete guidance. That is, assuming you’re not filing a fraudulent return.

You can read how long to keep each type of tax document on the IRS website. Generally speaking, most items should be kept between 3 and 7 years.
3. Organize your Current Situation
Once you know what to keep, and for how long, where should you keep your documents?

We prefer electronic records whenever possible. Most companies now offer e-statements, and if so, this makes filing them away an easy monthly task. If not an inexpensive scanner will do the trick. Services like Dropbox, or Carbonite can be used to backup your digital files in case something ever happens to your computer.

Beyond a simple filing system, or electronic structure, making sense of it all will provide you the biggest benefit of completing your financial spring cleaning. Because most people bank at one firm, invest at another, and have debt with a third company, see your full picture isn’t always easy.

So far, the gold standard for aggregating accounts is Mint.com. We’ve detailed Mint’s benefits before, and nearly a year later, it is still the service that works best for aggregating your financial life in one place.
4. Watch for Fraud
Although this step won’t do much to reduce clutter, it is a great time of year to check your credit. The federal government established AnnualCreditReport.com as a free resource for you to get a copy of your current credit report. Because you can access it 3 times a year, it’s helpful to pick out 3 times of the year you are likely to remember to do it. Maybe it’s your birthday, Christmas, and tax time.

What’s the point?

Checking your credit periodically is a good idea for a number of reasons. Mainly, you are looking for 2 things. Either errors made by somebody else – either a loan that was paid off, a missed payment reported that you made on time, or some other error that would cause your credit score to drop.

Beyond errors, you’re also looking for fraudulent activity. Accounts that are opened in your name, that you didn’t open, can be the costly side of identity theft. Catching this activity early will go a long way towards clearing your credit.

5. Make money while you clean
Whether you come across outdated electronics, toys your children have grown out of, or things you no longer use, throwing them out should be the last option.

Anymore, it is painfully easy to find buyers for your unwanted things. If you have a huge amount of items to move, a garage sale could work, but this too isn’t ideal. Random strangers camping outside of your house to buy your items marked at a quarter won’t often lead to getting the best price. Here are a few other options to consider instead.
·         eBay – the largest online auction site, allows for easy setup for even the least technical sellers. Fees are a little high, but you know there are a large number of buyers searching the site daily.
·         Facebook – Update your status with a few items you’d like to sell and the price. This often works well because selling among friends is easier and more comfortable than most other means.
·         Consignment shops – most towns have several shops geared towards specific items. Adult clothing, fancy dresses, and baby gear are popular storefronts that will sell your good condition items and split the proceeds with you.
·         Etsy – an online storefront geared towards homemade goods, crafters, and vintage clothing. Specialized items often do well here.
·         Classified Ads – for bigger ticket items, you may want to use your local newspapers classified section, or Craigslist, an online nationwide version.
Consumer Reports has a great guide that will give you more ideas, and describe what types of products do best on which site.