Spring Is a Good Time to Clean Up Your Finances, Too

Spring is a time of year when many of us spend days decluttering and cleaning out our homes as the weather gets warmer. As we’re cleaning basements and dusting furniture, this is also a great time to spruce up our finances.

This year, when you make a to-do list of cleaning tasks for around the house, add a section for your finances as well. A simple check-in of a few key financial items can help ensure everything is up to date and you are on the right track to reaching your financial goals.

1. Revisit your investments and risk.

When was the last time you sat down and looked at your investment strategies? With 2024 being an election year, the market could experience some ups and downs. If you're hoping to retire soon, you don't want a bad investment strategy to set you back. Have a plan to protect your hard-earned savings should volatility hit Wall Street.

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One of the biggest problems we see is that many people don’t know how much risk they are taking with their investments. Are you being too aggressive? Not aggressive enough? It’s a good idea to take a look at your investments regularly to see if you need to scale back.

What do your retirement contributions look like? Even a small raise can lead to a sizable increase in your retirement income. If you already contribute to a 401(k) through your employer, consider upping those contributions and ensure you are maximizing them. Always make sure you are contributing enough to take advantage of your employer’s 401(k) match if you are offered one.

If you want to open another account, consider contributing to a tax-free account like a Roth IRA.

2. Clean up your spending plan.

Having a realistic and balanced spending plan is the foundation for building long-term financial success. It’s important to know exactly how much money is coming in and going out each month. Look at all of your expenses, including groceries, cell phone payments, utility bills and entertainment.

While you are looking at what you spend, you should also remember what your financial goals are. Are you on track to save enough money for a down payment to buy your first home? Are you putting away enough for retirement?

If not, you may have to change your spending habits to allocate more money to your savings. Just like you go through your closet and decide which clothes to keep and which ones to get rid of, you can do the same with your spending.

If your expenses outweigh your income, you’re going to have to decide where you can cut back or get rid of an expense entirely. Write everything down so you don’t forget it. Document your budget on a simple worksheet or keep track of it online.

3. Declutter your documents.

Do you keep all of your important documents in a safe place? Are they organized? If not, spring is a great time to declutter and create a system to make them easily accessible.

You don’t need to keep every financial record forever. The IRS recommends you keep tax returns and important documents for seven years after you file, to be safe. Any pay stubs need to be kept for only one year. Both bank and credit card statements should be kept for at least three years, especially if they include any tax-related expenses.

If you are still getting all of these documents as paper statements, consider changing to paperless notifications. This could include credit cards, loans and even bills. Going paperless can help you reduce the clutter in your home. Getting statements digitally also makes it easier to keep track of your finances.

Remember, when you get rid of any of these documents, you should not simply throw them away. All of these documents include important information like account numbers, birth dates or Social Security numbers, so they should be shredded. You don’t want to risk anyone else getting their hands on your sensitive information.

If you’re getting ready to spring clean your finances and don’t know where to start, a financial adviser can help with that. We plan strategy appointments with all of our clients to ensure their financial plans are in a good place for the rest of the year.

Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.

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