Financial Spring Cleaning

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Financial Spring Cleaning

Marie Kondo, the organizing consultant who has become famous for her Netflix show Tidying Up with Marie Kindo, has started a movement motivating people to clean out their closets, get rid of items that no longer fit their lifestyle and reorganize their lives to spark joy. During this time of tidying up and season of spring cleaning, we encourage you to take this time to “spring clean” your financial affairs.

Here are a few ways to get started:

Do an insurance check up

Have you done any home renovation in the last year that increased the value of your home?  Make sure your homeowners’ policy has been updated to reflect this.  Shop around and make sure you’re getting the best rates on home and auto coverage.  Consider having an umbrella policy particularly if you are the parent of teenage children who may put you at risk for major claims and lawsuits related to driving accidents or underage drinking.  The extra liability coverage will protect your assets beyond what your homeowners and auto policies already cover.

Update your beneficiaries

With life’s continual changes, there may be a chance that the beneficiaries you named 10 years ago may not be those you would designate today.  Once a year you should make sure all the beneficiaries and contingent beneficiaries on your retirement accounts and insurance policies are the people you still want to name.  This simple step can simplify the transfer of assets to your heirs.

Review your estate documents

Look over any estate plans, including wills and trusts, to make sure they are up-to-date on both heirs and executors.

Review retirement savings

Have you reviewed your allocation lately? Take a look to see if it still aligns with your current goals.  Max out your 401(k) plan or consider opening an IRA or Roth IRA and set up an automatic transfer every payday.  Consider adding your tax refund to your retirement account.

Consolidate accounts

Keeping your retirement in one or two accounts makes it easier to manage.  Look into consolidating any 401(k) from a previous employer into a more appropriate investment that meets your target retirement.

Secure your tax information

All of your most critical personal and financial information can be found on just a few tax documents which, if compromised, could have catastrophic implications for your identity.  Be sure to store tax files in one spot in case the IRS ever has any questions.  Store your tax paperwork in a safe, safe deposit box or, at least, a locked cabinet.  It’s also wise to keep a secure digital copy of these documents in case of fire or flood.

Check your credit

You can request a free credit report through <every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion).  Check yours to make sure that all the information listed in the report is accurate.  Outdated records or false accounts opened by an identity thief could hurt your credit score and make it difficult to secure lines of credit in the future.  If you notice incorrect information on the report, contact the credit bureau and financial institution associated with the account.  You should also place a fraud alert on your credit report if you believe your identity has been stolen.  This will notify creditors that they should take extra steps to verify your identity before opening a new account in your name.  If you’re concerned about identity theft, data breaches, or someone gaining access to your credit report without your permission, you might consider placing a credit freeze on your report.  This free tool lets you restrict access to your credit report, which in turn makes it more difficult for identity thieves to open new accounts in your name.

Shred paperwork you no longer need

The IRS recommends keeping tax returns and supporting documents for seven years.  Keep documents such as birth, marriage and death certificates, divorce decrees, wills, Social Security cards, and military discharge papers forever.  Here are some guidelines to consider for other financial paperwork.

Passing on collections

What do you do if your heirs don’t want your collection of art, antiques, collectibles, jewelry, vehicles or other tangible property?  Consider donating the property instead of bequeathing it.  Current tax laws favor donations to public organizations that can make use of the items (e.g., art to museums and rare books to a university library). It’s called related use.

First, find out what kind of property your chosen charity is willing to accept and under what conditions.  Some charities may not be interested in the upkeep, storage, insurance and maintenance of the entire collection and may only want the most important items in your collection.  Valuations can be disputed, so get an independent, qualified appraisal for anything that may be worth more than $5,000.

Please let us know if you have questions or need assistance in giving your financial life a “spring cleaning.”   

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.