Tips for Cleaning Your Financial House this Summer

Ah…nothing like summer! It’s a time where you can get out and enjoy the weather, relax with your family and take some much needed time from work. For the Thompson-Rogers household, we also like to take the time to get to some tasks that we’ve put off — shredding mail, finishing the bigger house cleaning projects and making sure our financial house is in order.

Is your financial house in order? The summer is the perfect time to set aside a day or two to spruce it up. Here is my Top Ten list to make the task orderly and worthwhile.

1.    Make a Spending Plan. If you haven’t done so already, set up a budget. Make “paying yourself first” — that is, putting a set amount into your savings and investments every month — a priority. Analyze your current spending habits and plan ahead for large bills and expenses.

2.    Review your portfolio. Is it time to rebalance your investment portfolio? You may be at a stage of life that requires different investment tactics. Or, with the onset of higher taxes, you may wish to reposition your portfolio for a more favorable tax stance. Make sure your asset allocation reflects your current risk tolerance and capacity.

3.    Consider refinancing your mortgage. Mortgage rates are low, a perfect time to cut costs or pay off your home faster by refinancing your mortgage. Mortgages come in many different structures, so review your options carefully.  There may be one that will put more money in your pocket now and save you interest payments in the long run.  Also, having some extra time this summer will allow you to gather the documents that you need quickly.

4.    Tap the value of your home. For large expenses, or just the security of a rainy day fund, consider taking out a home equity line of credit.  These loans typically charge lower rates that other types of financing, and the interest may be tax deductible. You may not need it today, but you can tuck it in your back pocket for the future.

5.    Manage your credit card debt.  Open up those credit card offers that come in the mail.  Some of them offer much lower rates on credit card balance transfers.  But before you apply for a new card, read all credit terms carefully, and remember that credit card finance charges are not tax deductible.  Also look out for fees on transferring balances. Your best move would be to pay off your credit card debt and use the money you save on finance charges to begin a regular investment program

6.    Plan ahead for retirement.  Retirement may seem like it’s a long way away, but you’ll have more options if you start planning early. One of the best ways to get started is by taking advantage of your company’s 401(k) plan.  These plans let you reduce your current taxable income, save for retirement and defer all taxes on investment earnings. Many employers offer generous 401(k) contribution matches, too, which further enhance the value of this retirement funding vehicle. Some even provide a Roth 401(k), which gives you after-tax investment options with a much higher contribution limit than the Roth IRA.

7.    Protect yourself with insurance coverage.  Review your life, automobile, homeowners and disability coverages. The plan you established years ago may need updating to meet your current needs. There are many complex factors to review. You may analyze your liabilities: such as being hit by an uninsured motorist, someone falling on your sidewalk, falling off a ladder or a storm destroying part of your house. Reviewing your coverage after a tragedy strikes is common for many, but disastrous. Do it now. You should consult your insurance professionals to confirm your interpretation of the language in the contract

8.    Secure valuables and important papers. Imagine, for a moment, that your residence is completely destroyed and you lose everything:  deeds, marriage certificates, passports, and other valuable items.  Renting a safety deposit box ensures that these important documents remain safe, no matter what happens. You can also purchase fireproof safes that you can attach to a floor in your house. Lastly, some people include a videotape of their home — both inside and out — as well as their valuables, to help with insurance claims.

9.    Tidy up. Each of us has a spot where interesting items are stored: Old, unused credit cards, bank accounts under $10 or records that need updating or have outlived there usefulness. Close them out, cash them in, revamp them or distribute them to the trash bin. You can make most of your records paperless at this point. Set that up and save yourself the headache of going through your mail.

10. Organize your tax records. Always keep a record of your tax returns and important checks or charge slips that you may need in the future. Even if you had another person prepare your return, they probably did not keep a copy in their file for you. Maintaining a good system for your records is important.

It is always more relaxing to live in a clean and orderly home. By taking the ten steps above, your financial home will become an inviting, enjoyable corner of your life!

Let me know your favorite clean up projects via the links below.