Spring cleaning isn't limited to closets or gardens. One financial expert says that now's the season to sort through your personal finances, purge old documents, and right-size your budget.
In its Ask the Expert series, Cashay reporters connect with experts on vexing personal finance topics surrounding all of life’s milestones: Education, marriage, parenthood, divorce, and even death.
Stephanie Asymkos talked with Michael Duffy, wealth strategist at Merrill Private Wealth Management. Here is Duffy's advice for spring cleaning your finances.
[Interview has been edited for clarity and length.]
It's spring! It’s a time for out with old and in with the new. As people are reorganizing closets and homes, should they also prioritize “cleaning” and organizing their finances?
It's a great idea to get your financial house in order, as well as your home. It's always really good once a year to sit down and figure out what your expenses will be relative to your burn rate. It's nice to have a budget that you can be aware of and try to tweak during the year so that you can meet your financial goals. Understanding the cash that's coming in and cash that's going out is important.
The more responsibilities you have, the more you want to be able to start protecting yourself and those loved ones. They'll start to hopefully realize that there's a need to keep this information centralized so it makes it very easy when you're going to do your taxes every year and it's all in one spot for you to do yourself or for your CPA’s access.
How long should someone hold on to financial documents?
Good financial hygiene in storing information is important. It's more important nowadays to store digitally than physically and make sure that it's accessible to other people, not just yourself.
Get rid of all your physical documents! Go digital and go paperless. Do that with recurring bills and don't accept the paper versions anymore and get them electronically. Reduce the paper that's coming into your house, and it's good for the environment.
The general practice most lawyers tell their client is to keep a digital version for at least three years, and perhaps as long as five years. But since they're digital, why not just hang on to them forever?
For the person who is in debt or behind on payments, what’s something that they could do this spring to help them get out of the debt spiral?
With credit card debt, you can get creative and start taking a look at debt consolidation services and let them work their magic.
When you're really in debt, your option is just not to pay and deal with it later. That's always awful because you've got bad credit, and you're accumulating outrageous amounts of interest. You can go to one of these debt consolidation services. The good ones work to negotiate some debt forgiveness, and then consolidate all of the debt, and maybe even reduce the terms, and then you only have one payment. It's definitely something to consider.
You can't go to jail for not paying your credit card bill. You can go to jail for not paying your taxes. That is the number one debtor.
For student loan debt, the interest rates have never been lower for school debt. There's not a lot you can do there other than pay it off.
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