Spring Cleaning Your Financial House

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST, RLP®

Just like the spring cleaning regimen you have for your home you should maintain an annual cleaning ritual for your financial life.  Just like you didn’t realize how dirty the windows of your home were until you washed them, the cleaning of your financial house will reveal just as many positive surprises.

A first area to look at is your cash flow.  Some of you may know what you spent last year, but many do not.  This may not be important if you just won the lottery, but lottery winners miraculously run out of money too. Everyone should have a basic understanding of what their cost of living is.  Once you get a handle on your annual expenses, your future spring cleaning will be to evaluate spending, saving and debt repayments of the prior year compared to what you thought they would be.

Insurance policies are another financial matter that frequently renew from year to year without any thought regarding the coverage itself.  Is it adequate or too much?  Does it leave any perils exposed? Did something change in the past year such as you now renting a second home that may not be insured as a rental property.  Some in the northeast found out the hard way this winter what was or was not covered by their policy. Each year when the new policy arrives in the mail – read it.  Page one, usually called the declarations has the summary of the coverage and is the best place to start. If there is something that you don’t understand, get on the phone with your agent.

Benefits from the office are another area that often gets put in the set it and forget it category.  These decisions for many are made on the first day of work.  For someone at a job for a long time, it is not uncommon to see no changes made since the day of enrollment. 

For many, the 401K is a long term retirement investment vehicle that is intended to last for your lifetime.  As such, if you picked a globally, broadly diversified portfolio you may not need to change it too radically or too frequently.  But if you went to cash during the financial crisis of 2008-2009 and are still sitting there, you know exactly why you need to look at your allocations more than ever.

The same may be said for your beneficiary elections.  The day you signed up, there may have been no children in your life and your marital status may have been different.  Don’t wing this one.  Ask the company to show you written proof of what their records show, so that your group life insurance doesn’t go to a former spouse or your mother disinheriting your new spouse.