There aren’t many rituals of spring more commonly shared than the annual clean. Spring cleaning may not be easy and it may not be fun, but it is essential to reducing clutter and making things run smoother. Financial Spring cleaning is no less important. Clearing out your financial clutter each year can make your life easier and reduce the chances of any nasty financial surprises. Don’t worry, it’s easier than you think. Here are a few tips to help you get started.
1. Review Your Credit Report
Everyone is entitled to order one free credit report yearly from each of the three major credit bureaus: TransUnion, Equifax, and Experian. Many websites claim to offer free credit reports, but then pressure consumers into signing up for services. You don’t have to go through this. Credit reports are available at no cost from www.annualcreditreport.com. When you receive your credit reports, make sure all the information is accurate. Under the Fair Credit Reporting Act, both the credit reporting agency and the information provider (that is, the person, company, or organization that provides information about you to a credit reporting agency) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the credit reporting agency and the information provider.
2. Organize and/or Shred Old Financial Documents
If you’re like most people, you hang on to a lot of financial papers that seem important. Sort through your statements, pay stubs, bills and other financial records, and keep only the documents that are absolutely necessary. Since the IRS has up to six years to audit you, keep your tax returns, canceled checks and receipts, and any records supporting your tax deduction for at least six years. If you're unsure about whether you should get rid of certain types of receipts, scan them or make a copy, then go ahead and shred the rest. But don't simply toss paperwork in the trash. Leaving important documents in the trash without properly shredding them is a bad idea. The trash is a prime target for identity thieves.
Reducing paper clutter will not only help you stay more organized, it will also put your mind at ease. Plus, since the IRS accepts scanned copies of receipts, having those records available could come in handy in the event of an audit.
3. Record Your Financial Passwords and Store Records in a Safe Place
One of the biggest mistakes many people make is using the same username and password for multiple online accounts. This, of course, is an identity thief’s dream come true. Be sure you don’t make this mistake. You should use different login credentials each time you create a new online account. Even though you might be logging in over a secure Internet connection, there's still a risk that someone who figures out your password will attempt to access other accounts with the same login information.
Protect yourself against identity theft by logging your financial passwords in a password protected or encrypted document and storing it in a safe place. Also, important financial documents like a will, stocks certificates or bonds should be put in a safe place like a locked box or an online secure vault.
4. Review your Budget
Is your budget up to date? Have you incorporated any increases or decreases in your income? Take a close look at your budget to see if you need to make any modifications. Make sure you're reporting expenses accurately and have made some room for savings account contributions. Consider using a Personal Budget Worksheet to help organize your finances. The Federal Trade Commission provides a handy and easy-to-use budget worksheet.
5. Set up Automatic Bill Pay
Spring cleaning isn't just about de-cluttering; it's also about making things more efficient. Set up automatic bill pay, and link it to your primary checking account. Automatic bill pay will eliminate the chances of missing a payment and paying those pesky late fees. You can learn more about CNB’s Online Bill Pay here.
6. Pay off Holiday Debt Once and for All
What does your current debt load look like? Spring is a good time to look at your total outstanding debts and see which loans or credit cards you could pay off entirely this year. At the very least, put yourself on a stricter debt payoff plan, and pay off any debt you accumulated over the holidays. Cleaning up this debt quickly can put you in a much better financial position for the rest of the year.