Spring marks the arrival of two universal rituals: spring cleaning and tax season. This year, why not merge those concepts and give your financial house a good spring shakeout?
Start with your tax return
A completed tax return acts as a squeaky-clean window into your money life. It shows your after-tax income and reminds you of how much you made in the stock market and how little you earned on your side gig.
Before you put the forms away, take a moment to assess whether your tax situation will change dramatically this year because of a job change, college graduation, or new baby and plan accordingly.
If you received a big refund or owed big-time this year, now is the time to rework how much is withheld from your paycheck. The more dependents you claim, the less money is taken out and the more money makes it to your pocket up front and vice versa.
Need to tinker with your withholding? Check out the IRS’ withholding calculator (go to www.irs.gov and put “withholding calculator” in the search field).
Clean your cabinets
I recently bought a fire safe and tracked down which papers to keep and which to toss.
Generally, the IRS advises you to keep your tax returns indefinitely. Supporting documentation – such as W-2s, 1099s and receipts – should be kept for at least three years.
With the rest of the documents I asked myself three questions: Have I used this document recently? Why would I need it? Is it easily replaced? Old phone bills and credit card statements hit the shredder, while mortgage documents, birth certificates, insurance policies and the like were filed away.
Air your financial dirty laundry
In the spirit of the season, why not take a magnifying glass to your financial blemishes? If you have debt, come up with a plan to pay it off. Typically, credit counselors suggest focusing first on the card that has the highest interest rate, although others prefer you get the card with the smallest balance out of the way to give you a feeling of accomplishment.
If you haven’t checked to see if your credit report is filled with mistakes, visit www.annualcreditreport.com.
Dust off your savings plan
Even buy-and-hold investors should glance at their portfolios now and then. Take this opportunity to rebalance your retirement accounts to the mix you want. If your goals have changed, make sure you’re properly invested and saving enough to meet them. Also, weigh whether you’re saving too much in long-term investments and not enough in more liquid investments for a new car or an emergency, for example.
Create a to-do list of financial improvements
Most homeowners have a wish list. Mine includes repainting the hall and re-landscaping the backyard dirt heap. Shouldn’t we also have a list of financial improvements to aspire to – whether it’s being debt-free, taking a certain vacation, or affording the materials to beautify the yard? De-clutter for dollars: Clean out your closets for a good cause.
Only this year, be sure to keep meticulous records about the types of items you’re donating, the condition and the estimated value.
The IRS is cracking down on donation recordkeeping. You must also have a receipt for every dollar you donate going forward.
Plant your coins in the bank
During a traditional spring cleaning, coins sprout from couch cushions and junk drawers. The average American has $99 in coins lying about, according to Coinstar. Stick $99 in a savings account each year for 10 years earning 5 percent and thanks to compound interest – the equivalent of financial Miracle-Gro – you’ll have about $1,300.
Beat the rugs, not the Joneses
Come spring, neighbors emerge with souped-up barbecue grills and power wheels for the kids. New cars drive to new cabins and even newer boats.
While it can sometimes appear as if everyone is living the good life but you, remember that a lot of toys are paid for with credit and more stuff doesn’t equal more satisfaction. That said, if you want something, it will be a lot easier to see how to achieve it with a tidy financial house.
So start cleaning!
