After a long and particularly hard winter, spring is finally here. Spring is a time of cleansing and renewal. For most people, we think of cleaning our home, but, it’s also a wonderful time take an annual look at your finances. Below are 5 tips to help you clean your financial “home”
- Review your credit report:
The Fair Credit Reporting Act allows you one free credit report each year from each of the three major credit reporting bureaus. To see a summary of this act, go to http://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf To receive your free credit report go to: www.annualcreditreport.com
Check to make sure that it is mistake free. According to this act, the credit bureaus and the information providers (banks, credit unions, credit card companies, etc) are required to correct inaccurate or incomplete information. If you find any errors, contact the credit bureaus in writing, and inform them of any data that is inaccurate. For more information, check out the following sites:
FEDERAL TRADE COMMISSION
Most Americans do not take advantage of this free service. Set aside some time each spring to make sure everything is correct and there are no problems on your credit reports.
- Organize current documents and shred old ones:
Keep only the documents that are absolutely necessary. The IRS has up to 7 years to perform an audit, so, keep all tax returns and all supporting documents for that long and shred anything older than 7 years. State income tax audits are different from state to state. For example, Virginia recommends keeping state returns for at least 3 years. Check with your state to see what they suggest.
If you have a shoe box full of receipts to save, remember, the IRS will accept scanned receipts and https://www.shoeboxed.com/ will help you organize them. This website will accept your receipts in any form. You can use their smart phone app, e-mail, even send them in a prepaid envelope via regular mail. They scan them and organize them for you. Plans begin at $9.95/month.
How long should you keep other documents? Check out the table below from http://www.usa.gov/Topics/Money/Personal-Finance/Managing-Household-Records.shtml.
Do you have a lot of documents to shred and no way to shred them? Think about investing in a shredder for your home. The best shredders are crosscut shredders, meaning they shred in both directions, making small squares instead of strips. For around $50, you can buy a decent 12 page, cross cut shredder. If you prefer to have someone else do your shredding, many counties offer free annual “Shred events.” Go to your county website for more information.
- Review your budget:
Use this time to review your budget. Have you completely let your budget slide over the past year? This is a great time to look it over and pick up the financial reigns once again. You don’t need to invest in expensive budgeting software. There are some free options. Try www.mint.com from the makers of Quicken. “Mint pulls all your financial accounts into one place. Set a budget, track your goals and do more with your money, for free!”
Also, try FinanceWorks, which is a free service accessible through your Constellation FCU account online. For more information and a quick demo, go to the following link: http://www.constellationfcu.org/home/convenience/financeworks
- Use Automatic Bill Pay and online statements:
Once you have your budget organized, “go green” and sign up to receive your monthly statements and bills via email. This will cut down on the paper clutter. Save monthly e-bills and e-statements in an encrypted file on your computer.
Also, arrange to have your bills paid via automatic payments. Many utility companies offer bill payments linked to your primary checking account at no extra cost. Another option is to use an online bill payer service. Constellation FCU offers a free bill payer service. For more information, sign onto your CFCU account online and click on the BILL PAY tab.
- Secure your online passwords and paper documents:
We all know we’re not supposed to use the same password for everything, but, who can remember every password for every website? It’s just not possible. If you keep track of your passwords, put them in a password protected or encrypted document on your computer, or store them in a safe place in your home.
Paper documents, such as social security cards, birth certificates, passports, and marriage certificates need to be kept safe, not just from a potential identity thief, but fire and destruction as well. These documents can be scanned, and a copy saved on your computer, however, many companies require original documents. To keep originals safe, think about investing in a lockable fire and water proof file safe. This would also be a great place to keep any passwords not stored on your computer. I found several companies who offered versions ranging from $25 to $85, depending on size.
These tips may take a bit of time and effort, but, in time, this will become a ritual and your financial life will all the better.