Spring Clean Your Finances

If you are like me, the warmer days and bright sun motivate you! I love opening the windows and letting in the cool breeze, which carries away the warm stuffiness of winter. This is the time of year when I also feel the irresistible urge to purge. Clean out closets! Empty out files! Many folks feel a spark of inspiration in the spring. What about using some of your excess motivation to focus on your finances?

Review your resolutions. Did you make some financial resolutions at the New Year? Take a moment and review them. How are you doing? Do you need to refine your goals to make them more reasonable now that you have a few months under your belt? Don’t just abandon those good intentions after a rough start. Reconsider them and make adjustments, then carry on and achieve those goals!

Clean out files. Since springtime is also tax time, it offers a great opportunity to purge some paper. While combing your files for the documents needed for your taxes, make an additional pile for things to shred. Assuming they are not needed to document any tax deductions, old credit card statements, bills, and receipts can be shown the door. While you’re at it, consider making yourself a separate “Tax Documents” file, so that going forward you file things you will need next spring in a separate file. This can save time next spring when preparing your taxes.

Revise your filing system. Everyone should develop his or her own method of filing. It needs to make sense to the filer, and needs to allow easy retrieval of documents if needed. Some people, however, create complex filing systems with master folders and sub-category folders. If this is you, and if you dutifully file your paper correctly and never have a backlog of paper to file, then ignore the following advice. On the other hand, if you have lovely files, but tend to pile up the paper because filing it takes so much time, consider this approach instead.

Having tried the complex (but lovely) filing system in the past, I concluded that it was not for me. Instead I have one file called “To File.” I guess it is a small joke, since most of it will never be filed elsewhere. As I pay bills or receive paper that needs to be kept, it goes into this file. When I need something, I have only one place to look for it. No piles are on the desk waiting to be filed. I don’t have to remember which detailed category I might have used for this particular item. I know exactly where to find it.

The downside of this system, of course, is that the file gets large, and if I DO need to find something, I must page through the file to find it. Even that isn’t too bad, however, because it seldom happens. When it does – since I add to the file chronologically – I can start roughly at the point of the year it would have been added and save myself some paging time.

About four times per year, I sit down with this “To File” file and page through it. I pull out old statements, pay stubs, receipts, bills, or anything I know I will not need going forward. These go right in my shred box. I do this to keep the size of the file manageable, to pull things out that relate to taxes and put them in the “Tax Doc” file, and to generally remind myself of what is in there. This takes no more than ten minutes, and it feels so good to purge! It is like a little endorphin rush for me, and makes me feel like I accomplished a very big thing.

Once a year, or so, I remove the things that I do actually keep for some length of time. Things like receipts I need to keep indefinitely, paper related to insurance policies we have, etc. Then I spend the extra ten minutes or so filing those things into my permanent files, taking care to replace the former occupants of the files as needed. For example, I’ll file my annual homeowner’s policy statement in that file and simultaneously remove the prior year version. The old stuff gets added to the shred box.

Again, if your filing system is working for you, then kudos to you. By “working,” I mean you never have paper piling up, waiting to be filed. This method is for those that can’t seem to make the awesome, detailed system work. And that definitely includes me.

Keep the bills organized. As mail or paper comes into the house, I open or review it immediately. All the “extras” (envelopes, informational fliers or newsletters) get reviewed immediately and then chucked into the shred box. The parts that need attention, such as a bill that needs to be paid by check or a statement that shows the amount to be auto-drafted, gets put into a file called, you guessed it, “Bills.” Twice a month I tackle that file like a paper terminator. Auto-drafted items get entered into my spreadsheet and checkbook register, and then the statement gets shoved into the “To File” file. This is a great example of what I purge out of there on a quarterly basis. I like to keep the statements temporarily, in case I need to refer to them. But I never keep that sort of thing permanently. Bills that need to be paid via check get slightly different treatment. There is no spreadsheet entry for those, but I put the stub of the statement in the “To File” file, where most likely it will reside for three months or so before being moved on to paper heaven.

Consider a spreadsheet. Now, I mentioned a spreadsheet. I’m a nerd, so I keep track of things. This article is about getting organized with your finances, and I mostly wanted to cover paper purging. However, just a brief note on spreadsheets, since I mentioned it. Since 90%+ of the recurring bills we pay at our house are set up on auto-draft, I made a spreadsheet that organizes them by day of the month the draft occurs. In my bi-monthly bill-paying session, I refer to that spreadsheet to fill in my check register with the upcoming drafts. By staying ahead of it, I can catch errors in the drafts (which are very rare, I must say), and my checkbook register always shows that I have less money available than I actually do on any given day. I prefer it this way, as it provides a buffer.

The other benefit to my spreadsheet is that it reminds me of other things I pay monthly that are not auto-drafted. Typically, I do not have my credit card statements auto-drafted, but they appear on my spreadsheet, so I am reminded to go online and pay the balance at the appropriate time of the month. In general, I think of my spreadsheet as a way to organize my bill paying, so I don’t have to stress my memory over what needs to be paid when.

So, there you have it – some things to think about to spring-clean your finances. It is worth repeating that if you have a system that works for you, great! Stick with what works. We just regularly come across people in our planning practice that feel overwhelmed by all the paper. If a simplified system like this can help you, terrific. The main thing is to evaluate how you are keeping your finances organized and improve on your process if desired.

Dawn Starks is a CERTIFIED FINANCIAL PLANNER™ practitioner and financial advisor at Starks Financial Group. Starks Financial Group is not a registered broker/dealer, nor is it affiliated with Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment Advisory services offered through Raymond James Financial Services Advisors, Inc. This article expresses the opinions of Dawn Starks and not necessarily those of Raymond James. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER ™, and CFP® in the U.S. Raymond James is not affiliated with and does not endorse Francine Jay or Marie Kondo.

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Dawn Starks
Written by Dawn Starks