Spring Clean Your Finances

Spring is a natural time to start planning for the upcoming year, whether you plan to buy a home, return to school, or simply map out your summer vacation. Just like you clean your house and switch out your wardrobe, now is the perfect time to clean up your finances, help you prepare for tax season, and get things in order for the year ahead.

Conducting your own financial spring clean doesn’t have to be hard or overwhelming, and each time you do it the easier it will get. If it’s been a while, begin small, setting aside a half hour to conduct an easy check, gradually moving onto larger tasks as you gain momentum. Let’s start with a simple task—reviewing your credit score.

Review Your Credit Score

At the minimum, you should check in with your official credit record once a year. This is especially important if you plan on applying for a loan in the near future, as your credit score is one of the most important deciding factors for both approval and determining your interest rate.

Why check your score?

You may pay your bills on time every month and be responsible with your use of credit, but it’s vital for your financial health to both be familiar with your score and understand the factors that go into your particular score—taking corrective actions to improve it when necessary. Even if you’ve never missed a payment, there are other things that can lower your score, from maxing out or carrying large balances on your credit cards, opening too many accounts, or even being the victim of identity theft. Knowing your score and its breakdown can help you address any issues that are dragging it down.

How to check?

You can check your credit report from each of the three major reporting agencies (Experian, Transunion, and Equifax) for free, once a year, at AnnualCreditReport.com. Your report will show your full payment and account history, pointing out aspects of your credit that could be improved.

Official credit scores from the credit reporting agencies, however, are not free. You can buy access to your score through any of the reporting agencies, at any time, but there are other options. Every time you apply for a loan or other form of credit, the financial institution will disclose your credit score to you. Additionally, many credit cards will offer you free credit scores and monitoring—sometimes your score will appear right on your monthly statement. Lastly, it’s possible to sign up for free credit monitoring and get an unofficial (but still helpful) score, with an analysis. Just be sure to only sign up with reputable companies and watch out for hidden fees—they all have them.

What to check?

When reviewing your credit history, be sure that all the following are correct:

• Payment history
• Listed accounts
• Accounts listed as closed (or open)
• Credit limits and balances
• Public records
• Inquiries

What to do if something looks incorrect?

If there’s something wrong, you’ll need to dispute the error with the credit bureau and also report any inaccuracies to the company who reported the information (credit card company, bank, hospital, utility company, etc.). For more information on how to fix errors with your credit report, check out this excellent resource from the Consumer Financial Protection Bureau: Is it possible to remove accurate, negative information from my credit report?

Revisit Recurring Payments

Recurring payments can make up a large portion of your monthly bills and can be an easy way to free up a decent chunk of your monthly budget.

Why should you check recurring payments?

Although each individual charge may be small, these payments can add up! In fact, according to a recent study the average consumer spends $273 per month on subscription services, up from $237 in 2018.

How to check?

Online and mobile banking can make recurring payments easy to check and keep track of. Log into all your bank and credit card accounts, looking for fees that appear each month in the same (or similar) dollar amount. If a line item looks familiar, conduct a web search to find out what it is.

What to cut?

To reduce spending on these recurring charges, considering canceling things you don’t regularly use or need, including:

• Magazine subscriptions
• Streaming subscriptions
• Memberships (gym, club, etc.)
• Mobile apps and games
• Other services

Additionally, if you are looking to balance your budget, consider other regular, discretionary expenses—including holiday shopping or spring break vacations—that can be reduced. Set a budget and save for them in a designated account like a Christmas Club Savings Account, instead.

Assess Your Beneficiaries

When was the last time you checked who is designated as a beneficiary on your financial accounts—or that there was one listed at all? Because we never know what to expect from life, it’s important to have your financial accounts in order, should an unforeseen circumstance or event occur.

Why should you revisit your beneficiaries?

You may have experienced a major life change in the past year, like a divorce or a death in the family—or perhaps simply a minor one. Who you want to gain the benefit from your financial holdings—account by account—maybe change from year to year. And not having a beneficiary on some accounts, like IRAs, can cause unnecessary complications and delays during estate settlement.

What accounts and documents to check?

Nearly all financial accounts allow you to list a beneficiary. Look into your:

• Bank deposit accounts: checking, savings, money market accounts, and CDs
• Custodial accounts: accounts you hold for your dependents, or accounts where another person is or was the custodian for you
• Retirement accounts – 401(k)s, IRAs, Annuities

Additionally, take the time to review your estate planning, including your will and any trusts you have. For more information on the many types of account ownership and designations, from estate accounts to power of attorney, check out our account ownership post.

Audit Retirement Accounts

If you have changed jobs more than once, chances are you have multiple retirement accounts—maybe even some that you’ve forgotten all about. Take the time to round up all your retirement investments to ensure that you have the most cohesive and easy-to-manage plan in place, that also has the best financial payoff.

Why check in with your retirement accounts?

If you have multiple 401(k)s or other plans, it can be easy to lose track of them, possibly losing access to a valuable asset. Additionally, checking in with the specific mixture of investments for each plan—working with a financial advisor—can help you assess which accounts are doing the best, and which ones could use an adjustment. And keep in mind that work-sponsored HSAs belong to you (even after you leave a job), and can be valuable retirement tools for medical expenses, as well.

What to do?

Find account information for all retirement accounts, including those with previous employers. This could include 401(k)s, 403(b)s, HSAs, IRAs, and Roth 401(k)s. Most accounts will have some form of online account management. If you don’t currently have access, take steps to gain it again (by reaching out to your employer or investment company). Here are a few things you can do to manage and simplify your retirement accounts:

• Reduce redundancies: Roll over 401(k)s and combine other similar accounts into one account
• Check address, contact information, and beneficiaries
• Increase your automatic contributions from your paycheck
• Review investments and make changes to poorly-performing assets
• Make sure recurring investments or dividend distributions are being reinvested—uninvested accounts cannot grow! 
• For more investment tips, check out our post: Six Keys to More Successful Investing

What if I don’t have any retirement accounts?

The earlier you start saving for retirement, the better. If you don’t have a retirement plan, start one today. If your employer offers retirement benefits, reach out to them to enroll. If not, consider an individual retirement account—a Roth or Traditional IRA. These accounts allow for yearly contributions that must be completed by tax day. With a Traditional IRA, your contribution can have immediate tax benefits, too! Speak to a wealth manager to learn more about your options and create a plan that works for you.

How F&M Can Help

Spring can be a busy time of year, from tax prep to summer planning. But creating a yearly ritual of checking in with your financial accounts and revisiting your long-term plans can help you avoid pitfalls, stay organized, and increase your chances of success.

At F&M Bank, there are many ways we can help. Make an appointment and stop by one of our branch locations throughout the Shenandoah Valley to review your accounts with us, ask questions, and make any necessary changes. And while you’re there, consider meeting with an F&M financial advisor to understand the many retirement and investment options available to you to help you meet your financial goals. Reach out to us today to freshen up your finances and prepare for a new season of growth!