Spring Clean Your Finances: Financial Watch May 2016

Spring Clean Your Finances

Thinking about tidying up your "financial" house? From de-cluttering that mess of piles to getting your spending habits in order, here are some recommendations to help you get started.

DO THIS:

Clean up your spending – Your paperwork clutter can actually help control extraneous spending. Here’s how: collect a few months worth of credit card statements lying around, then use different colored highlighters to color-code costs in categories, such as necessary costs (utilities, insurance), items you wanted/needed (a new computer) and excessive purchases (regular dinners out). This is a great exercise to see how much you spend on things you don’t need or want, and curb that spending where you can.

Go paperless – Think “e,” as in “electronic,” when it comes to bills and credit card statements. Sign up to receive your bills and statements electronically and avoid the paper clutter forever. You can save and store your e-files via a free cloud-based storage provider like Dropbox or Google Drive.

Keep tax files – You will want to keep up to seven year’s worth of tax returns—at minimum the last three years—to help in filing future returns and/or making additions, should you need to file an amended return. The IRS says it generally audits back three years, so these files are proof you actually paid taxes should you get audited. If you file a claim for a loss from worthless securities or bad debt deduction, the IRS could go back up to seven years in past returns.¹ 

DON’T DO THIS:

Trash ALL old files – Some financial paperwork you should keep, such as past tax returns or other necessary documents for things like insurance claims, for example. As a general rule of thumb, you’ll want to keep the following files for up to a year for tax purposes (as needed):

• Utility bills if needed for business deductions
• Paycheck stubs until you’ve cross-referenced with your W2
• Brokerage statements until you get your annual statement
• Medical and dental expenses if you itemize on your tax return

Otherwise, if you have electronic copies of the above-mentioned documents, you can shred the hard copies.

Ignore your finances another year – It’s easy to ignore financial tasks up until the last minute, so start now by setting reminders (e.g., create a financial calendar) to organize your finances throughout the year. Tasks include: regularly reviewing insurance policies, itemizing deductions for next tax year or rebalancing investments.

I can help you learn about strategies to keep your financial life in order. Contact the office at 217-971-1256 if you’d like to discuss.