Spring Cleaning Your Finances

As spring ushers in warmer weather, it often signifies a fresh start. For many, this means opening windows, cleaning out the house, and changing out wardrobes. While you're freshening up your home, also consider a few ways to tidy up your finances. 

1.     Clean Up Your Estate Plan 

 Without properly executed estate documents, your inheritance might end up being divided by the local probate court. If you have assets you'd like passed to specific people, it's crucial to execute documents outlining these wishes. Collaborating with an estate planning attorney to draft a Last Will & Testament, Health Care Proxy, and Power of Attorney is essential.

Account titling can significantly impact asset transfer, often bypassing your Will entirely, so consult your attorney or financial advisor before making changes. 

2.     Streamline Your Investments.  

 Consolidating multiple bank and investment accounts can reduce fees and simplify your financial life. However, ensure transfers, especially of retirement accounts, don't trigger unwanted tax implications.  

Shifting from actively managed funds to passive index funds could be beneficial, considering the cost-efficiency and performance of the latter over the last two decades (1). Actively managed funds not only may lag the S&P 500 but could also come with higher fees and potential upfront charges, diminishing your investment value from the start. 

3.     Safeguard Important Documents.  

The IRS can audit your taxes for the last three years, extending to six years if issues are found (2). Thus, keeping tax documents for six years is important. For secure disposal of outdated records, use a home office shredder to prevent scammers from accessing your sensitive information.  

Switching to paperless statements from financial institutions can help reduce clutter and enhance security. Essential documents like deeds, birth certificates, and estate papers should be kept indefinitely in a fireproof safe that's hidden yet accessible within your home. This not only protects them from physical damage but also keeps them out of the wrong hands.  

4.     Review Your Credit Report.  

Make it a habit to check your credit report annually by visiting AnnualCreditReport.com, an authorized source for free credit reports under federal law. This allows you to monitor your credit status and identify any inaccuracies. If you spot discrepancies, promptly dispute them by writing directly to the credit reporting agency, including copies of any documents that substantiate your claim. This proactive approach helps maintain your credit health and can prevent potential issues down the line. 

Need help evaluating if you are on the right track for your goals? We’d love to help!

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Please read important disclosures here.

1.    "After-Tax Performance." Alpha Architect. Accessed [January 8th, 2024]. https://alphaarchitect.com/2023/12/after-tax-performance/#:~:text=Over%20the%2020%2Dyear%20horizon,on%20an%20after%2Dtax%20basis.

2.     Internal Revenue Service. "IRS Audits." Last reviewed March 15, 2024. Accessed [April 9th, 2024]. https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits.

3.     Schlesinger, Jill. "Financial Spring Cleaning." Jill on Money. March 26, 2024. https://www.jillonmoney.com/podcasts/financial-spring-cleaning.