5 ways to spring-clean your finances

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For many, spring means opening windows, sweeping the dust out and rotating wardrobes. While you’re freshening up your home, consider ways to also tidy up your finances. You may be surprised at what’s hiding in your accounts, inboxes, financial documents, and tax returns.

Here are five strategies to help you:

Do you find it challenging to keep track of your various financial accounts? Many people have checking or savings accounts at one bank, a brokerage account with another, an individual retirement account with yet another, and 401(k) accounts held at different retirement providers from previous employers. Having a number of accounts at different institutions can make your financial house feel disorganized.

To gain a clearer understanding of your financials and overall wealth:

• Consider consolidating your bank accounts – E*TRADE from Morgan Stanley has options that can help.
• You could also consider if rolling over your previous employer’s 401(k) plans into one place is right for you.

If you prefer to maintain accounts with different financial institutions, take advantage of any digital tools they provide that allow you to see all your accounts in one place. Getting that full picture can bring a fresh perspective about what you need to prioritize, as you manage day-to-day cash needs and pursue your longer-term goals.

Do you ever feel like your debt is in disarray? If you have multiple loans and credit cards with different interest rates and payment dates, it might be time to consider debt consolidation. Paying off your various debts via a single loan with a competitive interest rate not only helps you save money, it also leaves you with one simple payment date each month. Or you may choose to pay off debt like your student loans in multiple strategic ways. Too much debt may prevent you from tackling goals like saving for a house or investing for retirement. Having a plan can help reduce financial stress.

If you’re still getting paper statements from financial institutions, why not change your preferences to “paperless” notifications? This includes credit cards, loans, brokerage accounts—even bills. Going paperless reduces the amount of physical clutter in your home, and it’s also more ecofriendly. When you receive statements digitally, you can more easily track your finances because your statements are all in one place.

As for existing paper records, you should definitely keep (digitally, if possible, but paper records if not) the past seven years of tax documents and any documents related to still active loans or asset ownership, like the title on your car and any home ownership documents.

When was the last time you took a long look at your monthly finances? Just as going through your whole closet can help you decide what to toss or keep, taking inventory of your income and expenses can help you cut wasteful spending and make smarter financial decisions.

With a clearer picture of your budget, you can more carefully track how much you are saving for near-term goals, such as buying a home, as well as long-term goals, such as retiring by a certain age.

Some people ease the burden of annual spring cleaning by having deep cleaning days and sprinkling them throughout the year. Similarly, tax planning may require your attention at multiple points throughout the year, not just during tax-filing season. Whether before or after Tax Day, it’s never too late to incorporate tax-efficient strategies into your financial plan.

Consider a combination of the following strategies:

• Tax-loss harvesting: Involves selling securities at a loss and using such capital losses to offset capital gains in taxable investment accounts and help lower your taxable income.
• Tax-aware asset allocation: Different kinds of accounts are taxed differently. A tax-aware asset allocation strategy that accounts for those differences may help to increase after-tax returns.
• Tax-favorable investments: Many investments, such as municipal bonds, government-backed bonds, tax-efficient mutual funds and 529 plans, may allow you to save for a variety of goals while also offering tax benefits.

Decluttering your finances today can truly be reflected in the financial future you desire for tomorrow. Sometimes, getting there requires a bit of sprucing and reorganizing—with a little help going a long way.

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