I’m a personal finance expert: Here are 5 ways I spring clean my own finances
Just like your home, your financial house needs regular maintenance to stay in tip-top shape. What better time to freshen up your finances than spring?
As a personal finance expert, I recommend these five strategies to spring cleaning for a financial fresh start.
1. Inventory your assets and liabilities
Creating an inventory of everything you own and everything you owe is an important step in organizing your finances, especially as you plan for or approach retirement.
Assets can be personal property — like your home, vehicles, art, valuable collectibles and jewelry — or accounts, like your bank accounts, brokerage accounts and retirement accounts.
Liabilities are your debts, such as mortgages, car loans, credit card balances and any other money you owe.
You can create a financial snapshot in five steps:
???? Expert tip: Having this snapshot helps you gauge progress toward your financial goals and identify areas where you need to make improvements, such as increasing your savings or paying down debt. It’s also incredibly useful for your loved ones in case of an emergency.
2. Shop around for new insurance
Your insurance needs usually shift as you age. For instance, you may need less life insurance if you’re mortgage-free or your kids have left the nest. Or you might want long-term care insurance to protect your wealth from unexpected medical costs down the road.
As you spring clean your finances, take a moment to review your insurance policies and shop around for new ones:
3. Leverage high savings rates
How much are you currently earning on your savings account balances? If you bank with institutions like Bank of America, Wells Fargo or Chase, there’s a chance it’s not much more than the 0.47% national average — or less.
But with interest rates at record highs, now could be the perfect time to tidy up your earning potential with higher savings rates.
Digital and online banks are offering high-yield accounts that earn well over 4.00% APY. These banks are FDIC-insured and just as safe as the banks in your neighborhood. But because they have lower overhead costs, they’re able to reward savers with much higher rates.
Let’s say you have $20,000 in savings:
At 0.01% interest, you'd earn only about $2 per year.
But at 4.00% interest, that same $20,000 could grow by $800 in a year — without any extra effort on your part.
Making this one simple switch could drastically increase your savings growth and help you reach your goals with a larger nest egg. It's a smart, easy way to spring clean your finances and set yourself up for a more secure future.
To take advantage of high savings rates, consider putting a part of your nest egg in a high-yield savings account or money market account, which offers access to your money that’s similar to a traditional account. Or lock in today’s high rates with a certificate of deposit offering strong fixed rates even on shorter terms of up to a year.
Look for accounts with no or low minimum balance requirements or maintenance fees. And once you find the best fit, open an account and transfer your savings.
4. Fine-tune your investment mix
Next up, it’s time to review your investment withholdings.
When you're younger, you can afford to take more risks with your investments because you have time to recover from market fluctuations. But as you approach retirement, it's wise to gradually shift your portfolio toward more conservative investments to preserve your wealth.
Here are a few areas of your investment to consider when sprucing up your finances:
???? Expert tip: While it's possible to fine-tune your investment mix on your own, it's highly recommended to meet with a financial advisor. An advisor can help you adjust your asset allocation to match your risk tolerance and retirement goals.
5. Update your estate plan
Updating your estate plan — or creating one — is another key step in spring cleaning your finances. An estate plan makes sure your assets are managed and given out the way you want, and can help reduce taxes and legal fees for your loved ones.
Review these five main parts of your estate plan for updating:
???? Expert tip: Have you had any big life changes like marriages, divorces, births or deaths in the family? Don’t forget to update your estate plan accordingly. Talk to an estate-planning attorney to ensure your documents are legally sound.
About the writer
Cassidy Horton is a finance writer who specializes in banking, insurance, lending and paying down debt. Her expertise has been featured in NerdWallet, Forbes Advisor, MarketWatch, CNN Underscored, USA Today, Money, The Balance and Consumer Affairs, among other top financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduation with an MBA. Today, she's committed to empowering people to stand up and take charge of their financial futures.