YOUNGSTOWN, Ohio (WKBN) – Spring is here and a lot of us start our annual spring cleaning, but what about spring cleaning your finances?
Local financial professional Ryan Nisbett with Cottonwood Associates has some ways to spring clean your financial house.
He says spring is a great time to start fresh, especially if you’re caught up on paying off bills from the holidays, which Nisbett says usually takes two to three months.
So, with those credit card bills in the rear-view mirror and before the distractions of summer begin, take some time now to focus on your finances.
Nisbett’s first tip is to inspect your budget. A budget inspection can really open your eyes to what you’re spending money on.
Take out your credit card bills from the last six months and grab three highlighters. In one color, highlight the expenses that are necessary, like rent, utilities or groceries. In another color, highlight things you really want or use, like your Netflix subscription or a new vacuum cleaner.
The third color is for the less thoughtful purchases, perhaps a daily cup of coffee, a round of drinks at happy hour or the clothes you still haven’t worn. Focus on that third color and what you can eliminate from your budget.
Nisbett’s second tip is to rake in retirement contributions. April 18 is the deadline to contribute to an IRA for the 2016 tax year.
Workers are eligible to contribute $5,500 in an IRA, while employees 50 and older can take advantage of catch-up contributions and save an additional $1,000, according to the IRS. Ultimately, you want to be saving 10-15 percent of your salary into an IRA or an employer-sponsored fund, like a 401(k).
The sooner you put money into a retirement account, the more time your earnings will have to grow.
Nisbett’s third tip is to clean up your beneficiary forms. It’s a good idea to review these forms annually to make sure they are up to date.
Life insurance policies, bank and brokerage accounts and retirement plans typically all have beneficiary forms, which typically override your will. You should update all of these forms after every major life change, like marriage, divorce, deaths or births.
Nisbett’s fourth tip is to plug energy leaks. This could mean caulking cracks or sealing windows and ducts.
According to Consumer Reports, cracks and leaks that lead to home drafts can add up to $100 each year on your heating bill. Nisbett suggests installing a programmable thermostat or adding insulation to ceilings, walls and attics.
Electronics and appliances also drain energy, so investing in high-efficiency appliances is a good idea, especially because you might be eligible for a tax credit by making the switch.
You can also save money by unplugging appliances when you are not using them. The U.S. Department of Energy says not doing this can add 10 percent more to monthly electric bills.
Nisbett’s final tip is to take out your trash. Finally tackle those piles of financial documents sitting around your house!
Nisbett suggests holding onto pay stubs and bank statements for one year and keeping tax documents for seven years. On Cottonwood Associates’ website, a list is provided on which documents to save and for how long.
One last thing to remember is to shred — not trash — all documents that include account numbers, birth dates, passwords, PINs, signatures and Social Security numbers.