Spring Cleaning for Your Finances
The coming of spring means it’s time to bust out the dust pans and Swiffer’s, because it’s time for spring cleaning. In the spirit of cleansing your home and self, it is also time to clean up some of your finances. It’s tax season, which is always easier when you organize and keep track of your finances. Which is so important to do so you get the most bang for your buck.
Check Your Tax Withholding
You just filed your income taxes. There’s good and bad news to getting a big tax refund. The good is that you didn’t have to write a check to the IRS, and the bad is a big refund meaning you overpaid. Basically, you’ve been shorting your take home pay, giving the government an interest-free loan. So, examine the personal allowances you claimed on the W-4 form you completed for your employer. If you’re consistently getting big tax refunds, it’s likely you’re claiming too many allowances thus, having more money than necessary withheld from your paycheck.
Debt Inventory
Once a year it is good to take inventory of all your debts, which allows you to get a clearer picture of what you owe. Including due dates and interest rates for each balance. Make sure you are staying on top of your debts and make sure they are included in your budgeting plan. The goal is to eliminate debts as soon as possible to you can stop paying interest on those loans. You can find debt and loan calculators on your credit unions website. How soon can I eliminate my debts?
Review Insurance Policies
You want to make sure that you have the right coverage levels, and deductables. For example, you may have purchased a home or gained other assets since you first took out your auto policy. If so, it may be wise to increase your liability coverage. It may cost you more in the short-term, but you’ll be glad you had proper coverage if you need to make a claim. On the flip side, if you have home and auto policies with two different companies, you may be paying too much. Oftentimes, you can save by bundling both home and auto insurance policies within the same company.
Evaluate Your Credit Cards
If you’re carrying credit card balances, you should commit to a strategy to pay off that debt. You have several options to consider. One is to transfer balances to a lower interest card but be mindful of transfer fees along with the rate when evaluating lenders. Most credit card issuers charge a fee of 3% to 5% to transfer a balance to their card, which can add up to hundreds of dollars in fees depending on the size of your card balances. Another option is to get a personal loan with a low, fixed rate and set repayment term. If you own your home, you could use the equity to pay down your balances at a much lower interest rate. And remember, don’t close those old credit card accounts, because that could ding your credit score. Instead, once you’re free of credit card debt, use all your cards periodically to keep them active, and discipline yourself to pay off all your balances each month. How long will it take to pay off my credit card?
“Regardless of which strategy you choose to eliminate high-interest rate debt, creating a spending plan for managing your day-to-day expenses is critical to avoid falling back into debt in the future,” said Ryan Keene, Ardent’s VP of Lending. “If you need help creating a budget, I’d suggest checking out the free financial education resources provided by your credit union.”
Consolidate Retirement Accounts
If you’ve been fortunate to work for companies that offer 401(k) retirement plans, you may have accumulated several accounts that are sprinkled among various employer-sponsored plans. While diversifying your investments is always a good idea, it’s easier to manage them if they’re consolidated in one place. You have a few options. You could leave the funds in the current plan until age 70.5. Your current employer may allow you to rollover other accounts into your current 401(k), but only do that if your current plan offers low fees and solid investment choices. You can also roll over those old 401(k) accounts into an Individual Retirement Account (IRA), where you have a broad range of low-cost investment options. Just be sure you do a direct rollover, so you don’t incur any tax penalties.
“There is no best choice,” said John Trezza, of Ardent Investment and Retirement Solutions, a CFS licensed financial advisor. “It’s an individual decision, but you should be sure of the consequences.”