May 2023
Barbara O’Neill, Ph.D., CFP®, AFC®
Distinguished Professor and Extension Financial Management Specialist Emeritus
Rutgers Cooperative Extension
Early May is the mid-point of spring and a time when many people are doing some serious "spring cleaning." In other words, they take the time to do a thorough "deep cleaning" of their homes via tasks that are performed infrequently (e.g., washing windows, dusting light fixtures and fan blades, and washing curtains or drapes).
The phrase "spring cleaning" can also be applied to personal finance as people tidy up following income tax season. Below are 10 ways to "spring clean" your finances:
Asset Allocation Inventory- Start by preparing a current net worth statement (PDF) (assets minus debts). Then categorize savings and investments into asset classes: stock/equities, bonds, and cash equivalent assets. If asset allocations have shifted 5% to 10% (or more) from their target weights, rebalance back to where you started.
Automated Payments Inventory- Make a list of recurring household expenses that are charged automatically to a bank account and/or credit cards. Examples include streaming services, utilities, and membership fees. Keep this list handy in case you change bank accounts or credit card numbers are changed following a hacking.
Charitable Gifting Budget- Use the Rutgers Cooperative Extension Charitable Gifting Budget Worksheet (PDF) to identify charitable gifts for the remainder of 2023. Identify "A" (highest priority), "B," and "C" (lowest priority) list charities and the contribution amount, Most people make donations haphazardly without a plan.
Credit Card Inventory- Make a list of each of your credit cards with their account number, expiration date, three-digit security (a.k.a., CVV for card verification value) number, and the toll-free phone number for customer service. Keep this information in a safe place in case a credit card is lost or stolen.
Debt Repayment Acceleration Plan- Reduce spending to free up money (e.g., $100 per month) to make additional payments to creditors. Then select a debt repayment acceleration method: avalanche (extra payments on highest interest debt first) or snowball (extra payments on smallest balance debt first).
Decluttering and Sales- Identify unwanted possessions (e.g., ill-fitting clothing, outgrown baby items and toys, and duplicates) and develop a plan to sell them to make money. Options include consignment shops, garage sales, and online marketplaces such as Craigslist, eBay, Facebook Marketplace, and Nextdoor.
Lifestyle Check-Up- Review changes in family status (e.g., marriage, children, children leaving home, widowhood, retirement, divorce, and remarriage) and their impact on household income and expenses, income taxes, housing arrangements, and estate planning.
Post Tax-Season Review- Use your 2023 tax-paying experience to inform future tax-related actions such as better tax record-keeping, increased or decreased tax withholding and/or estimated quarterly payments, larger contributions to tax-deferred retirement savings plans, and tax-loss harvesting.
"Rule of Three" Comparisons- Take the time to compare three vendors or providers of a product or service. Doing the necessary research (e.g., online searches, phone calls, etc.) takes time but will provide data needed to make an informed decision. Use this worksheet to organize information gleaned from your search process.
Two Factor Authentication- Take the time to secure digital assets that contain sensitive financial information. Go to the "settings" and "privacy" sections of account websites and authorize a text message requirement for account access. A six-digit code will be sent via a cell phone text message to enable account access.
For additional spring cleaning ideas, review the SSHW message Tidying Up Your Financial Life.