6 Ideas for Cleaning Up Your Finances

100-dollar bills spread out on a surface
(Adobe Stock)

With all that's happened in the world over the past couple of years, I suggest you focus your energy on cleaning up your finances. Here are a few suggestions to get you started:

1. Review Your Beneficiary Designations

If I had a dollar for every client I've worked with who had outdated beneficiaries on their life insurance, IRAs, investments or bank accounts, I'd be on the golf course all day, every day. I've seen married individuals with a parent or sibling as their beneficiary, divorced people with their ex as a beneficiary and even people with no beneficiary at all. This spring, ensure all your beneficiary arrangements reflect your current wishes.

2. Update Your Estate Planning Documents

Beneficiary arrangements are just one element of a comprehensive estate plan. Wills, trusts, powers of attorney, living wills and letters of instruction should be updated periodically in accordance with the current law and your wishes. Add them to your to-do list.

3. Consider Your Strategy for Collecting Social Security

It takes a different skill set to navigate the pitfalls of retirement income planning than it does to build your retirement nest egg. One big decision that may loom is the "when" decision on Social Security. There's no one-size-fits-all answer, but generally later is better. With every year you delay to age 70 equating to roughly an 8% raise, later can make financial sense.

If you haven't, contact your local Social Security office this spring and start to dig into the details. For younger people, a claiming strategy may be premature. However, signing up for a "my Social Security" account, ensuring that your earnings record is accurate and understanding your benefits make sense.

4. Clean Out Old Documents

I'll never forget venturing into a client's basement to confront dozens and dozens of boxes of canceled checks and the like. Sure, you need to have a document retention strategy like the one found here, but this bit of cleanup will free up space and ease the burden for someone coming in later to sort out your affairs.

5. Check Your Automatic Payments

After a movie-of-the-month club incident years ago, we are diligent about spending time on this effort. Back then, our inattention caused us to pay for nearly a year's worth of "membership" we didn't use. A couple of weeks ago, I realized our satellite radio subscription allowed me to listen to the Kansas City Royals and I didn't need another subscription to do the same thing. As you clean, make sure you're not paying for services you no longer need or want, or that might be duplicated elsewhere.

6. Build Your Tax Deduction

As you're conducting your normal spring cleaning, set aside your unused stuff and consider donating at the local Goodwill or other charity of your choice. Get a receipt to document the donation and you may be able to take a charitable deduction when you prepare your 2023 tax return next year.

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