As soon as the temperature hits 60 degrees in spring, I open all my windows and immediately begin cleaning like Cinderella on Adderall. I LOVE SPRING CLEANING.
Spring is also the perfect season to tidy up your finances as well.
So after you dust and vacuum, take a minute to organize and find clarity and cleanliness in your money situation.
The basic premise of organizing your finances is to have a clear understanding of what you own and what you owe, to have all your accounts accessible where you can check in on them regularly, and make certain your money is working to achieve your financial goals.
Start with your retirement accounts.
Throughout our lives we’ll change jobs at least a handful of times and maybe even move into new careers. Often, what happens is people will go to their new company and leave behind an old 401(k). They take the "I'll deal with it later approach," and then inevitably forget about it. You end up leaving a trail of money over the course of your working years that you aren’t controlling or maximizing to your benefit.
So to spring clean your old retirement plans, I usually suggest rolling them into a self-directed IRA. There are a few reasons to consider this move:
First, you’ll have more investment options and control. You can make sure the investments within your IRA are suited to your risk tolerance and financial goals. This is your money, and it should be working for you! Secondly, I love the idea of consolidating multiple 401(k) accounts into one optimized IRA. Let's make our lives easier to manage!
Your current employer retirement plan is your #1 way to save for the future, but your old 401(k)s, even if they only have a little bit of money in them, are worth building. For example, if you have three 401(k)s from previous jobs and each only contains a few thousand, if you roll them into an IRA where you now have control of how they’re invested, you could grow yourself a nice little nest egg over the long-term. That's better than letting them sit idle in investments that don't necessarily meet your needs.
A couple of other things to consider: 401(k)s are best if your company offers a match. If you don’t work there, you aren’t receiving a match. Sometimes 401(k)s can have higher associated fees as well. So that’s another reason you may want to roll an old 401(k) account into an IRA.
It’s not that difficult to roll an old retirement account into an IRA, but I know it can be confusing and you do have options, so I recommend having a financial planner walk you through the process. I do this a lot with clients, a planner will keep you from screwing up the process.
(Me on the first nice day of spring)
What else can you do to organize and spring clean your finances?!
I want you to download an app to track your spending. There are a ton of good ones, I mention a lot of in my new financial guide. Do some research and find out what app might be best for you. There are plenty of free and inexpensive options.
I would also suggest you automate as much of your money situation as possible. Be sure you’re saving enough by automatically transferring money into a savings account. If you’re not sure how much you can afford to save, check out this cool app called Digit that will automatically save small amounts of money for you. Digit will analyze your spending and income patterns and throw a few dollars here and there into a Digit savings account that's FDIC insured (I'm not affiliated with Digit nor do I receive kickbacks for mentioning them).
The reason I always tell people to track their spending and automate their finances is because you’ll probably find ways in which you’re not helping yourself. Budgeting apps can assist you in making better spending decisions, and even though you think you don’t have any room to save more, I guarantee there’s probably some things you’re overlooking. Let technology help you track and categorize your expenditures and find opportunities.
Get all your important documents in order. Make sure you know your username and passwords for all bank accounts, investment accounts, retirement accounts, etc. This is your money! You should know where it is and how to actually see it. If you can opt for paperless statements do so...because trees.
I also like to see if I can get better deals this time of year. Can I negotiate lower interest rates on credit cards? Can I rid myself of wasteful spending? Maybe I need to cancel a few subscriptions. Maybe I should sell some items around the house? I have too many pairs of shoes collecting dust. There's money hiding in plain sight!
Finally, take inventory of your assets and liabilities to figure out your current net worth. You’re going to list everything you own then subtract everything you owe to find your net worth. I see net worth as a starting line. This is a number we can improve upon. A lot of young people have negative net worths. That’s okay, let’s work to get you up to zero and then into positive territory!
Spring is all about renewing your energy and getting organized, you have to do this with your finances, too. You might as well do it when there’s a nice warm breeze coming in and your house is clean. It’ll clear space in your head and give you a feeling of control, which is super important if you’re going to improve your financial situation.
That’s all I really wanted to talk to you about today. Remember to download your copy of The Get It Together Guide.
Disclosure: This post is not intended to be personalized financial advice. Every situation is different, so consult a financial planner before making money moves, y'all. What's right for one person, might not be right for you!