The Young Professional’s Guide to Financial Spring Cleaning



Spring has sprung – at least officially – and with it the urge to open all the windows, break out the broom and clean house.  But why stop there?  Your finances can also benefit from a little spring cleaning, and it’s something you can do even if it still feels like winter outside.

As a busy young professional, it can be tough to closely monitor your money situation on a daily basis.  But if you’re willing to spend a few of these extra daylight hours getting organized, you can save yourself a lot of time, stress and even cold hard cash in the long run.  Here are six essential and effective ways to do it:

1. Get it all together
It’s a lot easier to manage your finances if you have a full picture of all your assets (e.g. savings, investments) and liabilities (e.g. student loans, credit cards) in one place.  Start by gathering paper statements, resetting forgotten online account passwords, and tracking down that 401(k) from your last job – not exactly fun tasks, but the legwork will be worth it in the end.

Once you have it all compiled, consider using a personal finance app to keep track of everything on an ongoing basis (and avoid the financial scavenger hunt next year).

2. Purge or store
Figure out which documents you need to keep (and how long you need to keep them), then mercilessly shred the rest.  Most of the items in your “keep” pile will likely be related to taxes – the IRS recommends holding onto returns and supporting documentation for three years, but be aware that they can audit you up to seven years later if you’ve under-reported income or claimed a loss for bad debt.  Paystubs can typically be tossed once you get the year-end summary.  As for monthly credit card and bank account statements, it’s usually sufficient just to keep the most recent one.

3. Digitize
Now that you’ve gotten rid of all that paper, take a few minutes to prevent a future pileup by switching to paperless statement delivery for your various accounts.  Next, opt out of credit card and catalog mailing lists to reduce paper as well as unneeded temptations.  And if you’re really serious about reducing the clutter, you may want to consider buying a scanner and going completely paperless.

4. Do a credit check-up
Experts recommend checking your credit report at least once a year, so if you haven’t done it lately this would be a good thing to add to the list.  Visit AnnualCreditReport.com to get a copy of your report from the nationwide reporting agencies (it’s free to do this once per year).   Look for any mistakes or irregularities that may suggest identity theft, and dispute anything that looks off.

5. Make a plan
Think ahead to next year’s financial spring cleaning: How would you like your financial situation to change by then?  Whether you want to pay down student loan debt, increase retirement investments and/or save for a future goal like buying a home, now’s the time to identify your goals and start working toward them. To see if you are on track for retirement, consult SoFi’s retirement calculator for more information.

Once you know how much you want to put toward savings, investments and debt on a monthly basis, make it easy on yourself by setting up automatic payments and contributions where possible.  Bonus: Some student loan lenders offer interest rate discounts for doing this.

6. Re-assess student loans
For most young professionals, a financial spring cleaning would be incomplete without assessing the current state of their student loans.  If your financial situation has improved since you took out your loans, it may be time to see if you’re eligible to refinance at a lower interest rate.  By refinancing student loans, you can consolidate your loans into one monthly bill and save a significant amount of money on interest.  Depending on your situation, you may even decrease your monthly payment or shorten the time it takes to pay off your loan.

 

DISCLAIMER: This article is meant to provide useful information on the topic, but it does not purport to provide tax advice.  You should consult with your own tax advisor for guidance based on your specific situation.

 


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