6 Ideas for a Top-to-Bottom Financial Spring Cleaning

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I don't know about you, but this spring, I'm feeling a lot more energy and excitement than I have over the past couple of years. You may be thinking about translating that energy into outdoor activities or a little vacation. Makes sense, but I'm going to suggest you focus a bit of your energy on spring cleaning -- more specifically, spring-cleaning your finances. Here are a few suggestions to get you started:

1. Review your beneficiary designations. If I had a dollar for every client I've worked with who had outdated beneficiaries on their life insurance, IRAs, investments or bank accounts, I'd be on the golf course all day, every day. I've seen married individuals with a parent or sibling as their beneficiary, divorced people with their ex as beneficiary, and even people with no beneficiary at all. This spring, ensure that all of your beneficiary arrangements reflect your current wishes.

2. Update your estate planning documents. Beneficiary arrangements are just one piece to an effective estate plan. Wills, trusts, powers of attorney, living wills and letters of instruction should be periodically updated in accordance with the current law and your wishes. Add them to your to-do list.

3. Consider your strategy for collecting Social Security. It takes a different skill set to navigate the pitfalls of retirement income planning than it does to build your retirement nest egg. One big decision that may loom is the "when" decision on Social Security. There's no one-size fits all answer, but generally later is better. With every year you delay to age 70 equating to roughly an 8% raise, later can make financial sense. If Social Security is decades in your future, signing up for a "my Social Security" account could be a better spring-cleaning task. Doing so will allow you to ensure your reported earnings are correct and allow you to understand your future benefits.

4. Clean out old documents. I'll never forget venturing into a client's basement to confront dozens and dozens of boxes of canceled checks and the like. Sure, you need to have a document retention strategy like the one found here, but this bit of spring cleaning will free up space and ease the burden for someone coming in later to sort out your affairs.

5. Check your automatic payments. Several years ago, I was doing some financial spring cleaning of my own. During the process, I found myself examining our wide range of automatic deductions and payments. There was a charge that I did not recognize but had seen before. I just assumed -- you know what they say about that -- my wife had signed up for something. This time we were looking at things together and realized it was not a charge either of us had made. In fact, our daughter had signed us up for a movie-of-the-month club. We didn't receive any movies, but we did pay for nearly a year's worth of "membership." As you clean, make sure you're not paying for services you no longer need or want.

6. Build your tax deduction. As you're conducting your normal spring cleaning, set aside your unused stuff and consider donating at the local Goodwill or other charity of your choice. Get a receipt to document the donation, and you may be able to take a charitable deduction when you prepare for 2022 tax time next year.

This spring, clean up more than your garage with a focused effort to fine-tune your finances.

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Personal Finance