Spring cleaning your finances

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Financial professional Barry Bigelow from Great Waters Financial brings us tips to spring clean our finances.

One of the biggest things that people neglect when it comes to their finances is their financial planning. It is easy to dream about what your future will look like, but to do that, you need to feel financially secure. That’s where your plan comes in. It starts with sitting down and determining how much income you need to survive, and then building a lifestyle from there. Great Waters Financial has created a checklist to get you started which you can download at greatwatersfinancial.com.

The next step is to clear out your mindset. Think about a project you’ve done around the house — like cleaning out your closet. It always gets worse before it gets better. The same thing can happen with your finances. They may look fine at a glance, but when you start digging in, you realize there are more issues than you expected. You’ll need to adopt the mindset that things will get messier before you can clean them up.

The next step is to wipe away as much debt as you comfortably can. While most of us were stuck at home during the early days of the pandemic, we used the money we weren’t spending to pay down debt, including credit card debt. The problem is credit card debt is steadily increasing again, and we’re approaching the record high of $927 billion in credit card debt. The timing couldn’t be worse. The Federal Reserve set to increase interest rates, which means debt will cost more when it comes time to pay it back. (CNBC) Barry recommends wiping away as much debt as you can — especially that high-interest debt like credit cards.

Another tip is to clear out documents. It can be hard to focus on the right things when you have a drawer full of disorganized documents. One of the questions clients ask us all the time is how long they need to hold on to their tax returns. The IRS recommends keeping records for three years for a typical return. (IRS) Even after you’ve shredded paper documents, you can keep electronic documents stored safely on the cloud. Make sure your documents are housed in a secure location (AARP).

Lastly, check on your estate plans. It’s easy to forget about your estate plan — after all, it doesn’t go into effect until after you pass away — however, this is an important step in spring cleaning your finances. Changes in family dynamics can happen at any time — births, deaths, marriages, divorces — and your estate plan should reflect your current wishes. Everyone should have an estate plan, even if you’re young or if you don’t have a lot of assets. If you don’t have an estate plan, now is the time to start.