5 Steps to Include in Your Financial Spring Cleaning

performance data with graph notebook

By Todd Wilhoit, CRPC

While you’re diving into the chores that have been neglected during the rest of the year, it's also the perfect time for some financial spring cleaning. Here are five essential steps to take to spring clean your finances.

1. Go Through Old Financial Documents

Sort through financial records and organize what's important, then shred those that are no longer needed. It is amazing how reducing paper clutter not only makes it easier to stay organized, but also provides a certain degree of peace of mind.

The IRS has up to six years to conduct an audit, so it’s a good idea to keep canceled checks, certain receipts, tax returns and any other tax-related documents for that period of time. Anything else can usually either be destroyed or scanned into the computer. Either way, reducing document clutter is a necessity for a productive financial spring cleaning.

2. Review Your Credit Report and Clean Up Bad Credit

Under the Fair Credit Reporting Act (FCRA), everyone is entitled to one free credit report every year from each of the three major bureaus: Experian, Transunion and Equifax.

Reviewing your report once per year ensures both the information provider and the credit reporting agency have reported correctly and, if not, under the FCRA they are responsible for correcting incomplete or inaccurate information on your report. While factually accurate information could remain on your credit report for up to 10 years, inaccuracies and errors are quite common should be disputed. (For related reading, see: How to Dispute Errors on Your Credit Report.)

You can contact AnnualCreditReport.com to obtain a free copy of each of your credit reports for review. Once you have reviewed your reports, look at the factors that have prevented you from getting a loan, caused you to pay high interest rates, or any other potential consequence of having bad credit.

3. Review Your Budget

Do you have any income increases or decreases? How about additional or fewer expenditures? Or even future financial plans?

Spring cleaning is the perfect time to see if you need to make any adjustments to factor in any current or future changes. Always remember to factor in contributions to your savings and retirement accounts. Using a budget worksheet can simplify the process and help you better organize your finances.

You might want to consider setting up automatic payments for some bills, as spring cleaning is also about making things more efficient and less time-consuming. Additionally, using automatic bill payment will keep you from missing any payments and suffering late fees.

4. Eliminate Holiday and Other Debt

This is also the perfect time to take a good look at all of your outstanding debts and decide which could be completely eliminated by paying off some credit cards or smaller loans. Holiday debt is particularly ripe for this type of spring cleaning. Eliminating this unnecessary debt can dramatically improve your financial health—and state of mind—for the remainder of the year. (For related reading, see: How to Reduce Holiday Debt.)

5. Consolidate Accounts

Do you have multiple brokerage accounts that could be consolidated, old retirement accounts from past employers that are eligible to be rolled over, or bank accounts you seldom use? Now is the ideal time to go through all of these accounts and tidy them up.

While financial spring cleaning likely sounds as thrilling as regular spring cleaning—only without the pleasing pine scent—periodically going through your financial documents, reviewing your credit, tweaking your budget, and streamlining your investments and expenditures will undoubtedly make the rest of the year that much more enjoyable and less stressful with the peace of mind this type of deep cleaning produces.

(For more from this author, see: How to Fund a College Education.)

Disclosure: Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Chesapeake Investment Planning, LLC is not affiliated with Kestra IS or Kestra AS.

This article was originally published on Investopedia.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.