Financial Spring Cleaning
Spring is a traditional time to clean house. Use that time to clean up your finances as well and make your life easier. Here’s how.
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Full Transcript below:
00;00;00;00 - 00;00;27;12
Unknown
Welcome back to 30 Minute Money. It's the podcast that delivers action oriented, smart money ideas and bite sized pieces. I'm Scott Fitzgerald from Roc Vox Recording and Production. Joining me, Steve, Wershing from Focused Wealth Advisors. And, you're going to talk to me about spring cleaning. We're going to talk about seriously going to tell me about cleaning. We're going to talk about spring cleaning.
00;00;27;12 - 00;00;53;10
Unknown
It's springtime and it's time to clean out stuff. Springtime for Steven. That's a that's, as a whole, different topic. It's another episode of spring cleaning. The natural spring cleaning. Yeah. you know, spring cleaning is is all about is all about getting organized and reducing clutter and polishing things up. And so that's what we're going to because you can do that in your finances as well as your house.
00;00;53;10 - 00;01;14;18
Unknown
And so I thought this would be a good time of year to be talking about how you can, clean up your finances a little bit. And, Mike, like, make life easier for yourself. And do you, I mean, you're saying this, but is this something that you've been saying for a while, like at least once a year, you should do this or twice a year or, you know, I mean, a lot of it depends on how much you keep on top of stuff.
00;01;14;19 - 00;01;36;00
Unknown
Yeah. You know, but some people just haven't ever done this kind of thing. And some people have let it go for a while. And so, you know, this is it's a good time of year. Let's do it now if, if, if things have gotten a little messy, okay, things got a little cluttered. Let's take care of it. And so the first thing that that we want to do is you want to consolidate your information.
00;01;36;02 - 00;01;55;08
Unknown
you know, one of the things that I find working with people is that people struggle to make good financial decisions, because getting the information all together is a big job. And, and people don't want to take it on and they avoid doing it and they, they don't finish it up because there's just, you know, there's just a lot of work.
00;01;55;08 - 00;02;13;14
Unknown
So pull that stuff together now before you need to do anything. And if you can pull all that stuff together, it makes a lot easier. So, you know, keep all of your statements in one place. If you, if you don't have a system for pulling all the information into one place where you can see it. So I'll think about doing that.
00;02;13;14 - 00;02;29;00
Unknown
You could do it with quicken. You can do it with certain banks, will let you pull accounts together. Our financial planning system. I tried to get all of my clients to hook up all their accounts to it. So whenever they log into it and look, whenever I log into it and look, we're seeing everything all at once. And it's always updated every day.
00;02;29;02 - 00;02;48;01
Unknown
And so consolidating your information is one of the first things, is a basic thing to do in spring cleaning. Imagine how they must have done this back in the day before computers. It was. It was easier because people had fewer accounts. okay. So back in the days before computers, you had a checking account, you had a savings account.
00;02;48;04 - 00;03;07;27
Unknown
You may have had a for one k at work. you know, I still had to go. You still had to, like, you couldn't just look at your account, you know, you couldn't. Yeah, but but you you would you you would know what you had in there anyway. It was, it was less, you know, because we did have debit cards.
00;03;07;27 - 00;03;27;07
Unknown
So you knew you were spending your money. Right. And when when, you know, when I got my bank statement at the end of the month, everything was there. Yeah. Because they didn't have things all over the place. Yeah. You know, so but now there are a lot more opportunities. And so people just, you know, like I was talking with my kids, I was, I was going to transfer some money to my kids.
00;03;27;07 - 00;03;50;13
Unknown
And I said, you know, well, when I see you next week, you know, I'll give you a check. And they're like, why don't you just Venmo it to me? Like, yeah, it's a good idea, right? And so, you know, we've got Venmo, we've got PayPal. We've got, you know, credit cards, Cash App I never never I thought it would when I was a new financial planner, I thought paying for groceries with a credit card was like the most irresponsible thing I could possibly do.
00;03;50;15 - 00;04;09;02
Unknown
Now I do it all the time, right? I know I don't use a credit card, I use my phone. So, you know, so it's just the reality of our times now, is it? People have stuff in a whole lot more places and that and that way it's a lot easier to to lose track of it. I will, I will share with you the experience of a client.
00;04;09;02 - 00;04;33;28
Unknown
And I felt I felt I felt good, but I felt really bad for, for her. because, you know, she's gone through a bunch of challenges, a bunch of difficulties, and she knew she'd accumulated some credit card debt, and it was making it hard to keep up with their bills and that kind of stuff. And I said, okay, well, so we got to pull all this stuff together and find out how many cards, what's the balance of each, what's the minimum payment with the interest rate, you know, and lay that out.
00;04;34;04 - 00;04;55;00
Unknown
And she I saw her I saw her this week and she said, you know, I, I did that and it shut me down for a week, she said once I took a look at how much I have out on credit cards. Oh, yeah. I couldn't even think about it. Sobering. Yeah, yeah. Consolidating your information is the basis of being able to make financial decisions.
00;04;55;00 - 00;05;13;14
Unknown
And so that's the first part of spring cleaning is just get it all in one place. And if you can get all the data, if you can get stuff feeding data on a regular basis into one place, that's even better, because then you can then at any point when you want to see just click into the app and you can see everything right there, doesn't take doesn't take a second.
00;05;13;20 - 00;05;30;19
Unknown
So that's where we start. Now, once you've got it all in one place, then we want to take a look at the balance sheet. The balance sheet is the fundament, the most fundamental of accounting and financial planning documents. It's a list of everything that you own and everything that you owe. And the difference between those is your net worth.
00;05;30;21 - 00;05;47;14
Unknown
And we always want to keep an eye on the net worth, because that's what's going to pay for all of your goals. That's what's going to pay for your retirement, that's what. So we want to track net worth over time. So if you haven't looked at it in a while, once you get all your information pulled together, take a look at your balance sheet.
00;05;47;16 - 00;06;12;02
Unknown
I was just thinking of that conundrum of how much I owe and how much I owned, and I got a little upset. You got for clamp. I got for cleft. The reality hit me. I'm sorry. It's that, but that's it. That's a good thing, right? Because, you know, you can't make good decisions unless you're right. Right. Facing reality.
00;06;12;05 - 00;06;27;23
Unknown
Yep, yep. So once you've looked at your balance sheet, then you want to take a look at your cash flow, how much money is coming in and how much money is going out. And this is where a lot of people really have a tough time because again, this these days it's so easy for money to go out. Oh yeah.
00;06;27;23 - 00;06;48;05
Unknown
You know, you use credit cards for stuff. Like I said, I go to the grocery store, I use my phone to pay for it. Yeah. but even worse are subscriptions because everything now is a subscription. Everything. I can't buy a piece of software without being a subscription. Right. So, you know, and we sign up for things we forget about, right?
00;06;48;05 - 00;07;07;01
Unknown
And until until the one time, like you're saying, when you go in to do the cleaning and you look in, you like, what is that? I've, I've had a couple times where I didn't even know what the charge was, because sometimes these companies, when they let you through, right, right. It doesn't say what it is. It's just something like ABC Corp. and you're like, what is this?
00;07;07;02 - 00;07;29;06
Unknown
Yeah. What's this? $75? And there it was. Yeah, exactly. And people forget about that. So yeah, that's that's you know, so look at those cash flows. Look at how much came in. How much went out. Again I try to get everybody to all of my clients to sign up for our for, you know, for our financial planning system, because when they connect their bank and credit card accounts, it starts harvesting all that data.
00;07;29;06 - 00;07;54;14
Unknown
Now, I can't see it. The client can see it, but they can let me see stuff at the category level. And here's the thing. When the probably the most important number in your financial plan is how much are your total expenses? Because that's what we have to plan for. And I saw a study that came out a year or so ago, and I was grateful for it because it just backed up my own professional experience with clients.
00;07;54;16 - 00;08;18;07
Unknown
When people try to reconstruct or estimate what they spend total, the average margin of error. Take a guess. Okay, 30% really that much? 30% at. So you know, that's the average. Some people are 10% off. Some people are 70% off. yeah. But you can't build a plan on a 30% error rate. Yeah, right. I mean, that's just you.
00;08;18;08 - 00;08;32;13
Unknown
So so look at your cash flow. That's the next thing. next step would be take a look at your emergency fund. How much do you have set aside in case your water heater blows up or your car needs a repair? That kind of stuff. We should be three months to six months, depending on what your income looks like.
00;08;32;13 - 00;08;55;25
Unknown
If you're salary earning W-2 employee three months is good. If you're an independent businessperson, you probably want more like six months as an emergency fund. So how does that where does that stand? Is is that enough? or, you know, for some clients, you know, they systematically put money in there. Is it too much? You know, should, you know, can you pull some of that off and put it into a long term investment account?
00;08;55;25 - 00;09;13;08
Unknown
You know, I mean, if you're if you're constantly putting money into that fund, you may have more there that you need. And more importantly, is it working for you? if you've if, if, when interest rates were really, really low, you just put it in the bank account. Didn't bother to look at it because none of them made any money, I understand that.
00;09;13;11 - 00;09;33;24
Unknown
Fine. But now those do make money. So if it's in a savings account making 1%, you should be talking to your bank and saying, hey, what other options do you have for this? Because you know, these days three, 4% are very common. So if you've got if you've got an emergency reserve fund, don't keep it in a checking account.
00;09;33;29 - 00;09;55;28
Unknown
Put it someplace where it's going to make a little money. So that's the next step in your spring cleaning. when you consolidate your accounts, the next thing you want to take a look at is how many accounts do you have and how many fees you're paying for each of those accounts. If you have four different investment accounts and they each have an account fee, well, you're paying four times the amount of fees that you might need to.
00;09;56;00 - 00;10;14;28
Unknown
And so take a look at how many you know, what you're paying in fees, bank accounts have fees. Investment accounts have fees. You know, take a look at what, take a look at how much you're paying overall and clean out any of those expenses that you don't need to pay. now we get to some of the more practical stuff, some of the stuff that people aren't sure about.
00;10;15;01 - 00;10;33;29
Unknown
When is spring cleaning clean out the old documents, don't hang on to old financial documents. There's no reason to. And they can become a storage headache. And also, you know, the older ones may have personal information on them. So try them. Shred them. Exactly. Don't just but don't put them in the garbage. Yes. Please don't. Don't throw them out.
00;10;34;02 - 00;10;52;01
Unknown
Shred them. What I recommend is for, for most records, like specifically tax records, keep seven years and so that will get taxed. You have tax filing time is often a good time to do this clean out. Because when you put this year's return in a folder, you can take the one from eight years ago and throw it out, right.
00;10;52;03 - 00;11;15;23
Unknown
Or shred it, and just keep seven years worth of data. And if you do that, you know, if you do that systematically, you know, you know, the IRS is not going to go back that far to audit you unless you're committing fraud. And they can tell, so if you keep seven years of those in for those records and then, you know, even even for investment accounts, you know, there's no need to keep stuff more than seven years.
00;11;15;23 - 00;11;34;13
Unknown
So just, you know, have a regular routine of throwing out stuff that's more than seven years old. I know that's where I have. We have a file cabinet in our house that's got stuff that's probably 20 years old in there that we buy the office through the shredder. You know, we got a shredder. Okay, well, yeah, I had one here, and then my wife stole it.
00;11;34;15 - 00;11;58;26
Unknown
Oh, okay. Yeah. So get rid of some of that stuff. Yeah. Reason. Hang on. Totally have to. And that for investment statements. Too many people get monthly or quarterly investment statements. you know, once the years gone by, you can probably just keep the year end statement. You don't necessarily need to keep every month. Just keep the year end statement and keep the year end statement for seven years and then toss it or, you know, shred it.
00;11;59;03 - 00;12;23;08
Unknown
And that's even, you know, a lot of the a lot of your, your companies offer the paperless statements. So you really they're online anyway, right. or you download a PDF to your, to your computer or something. You don't need having the paper ones is even less common now. And since you bring it up, if you download, you know, PDF statements under your computer, make sure that they're secured somehow.
00;12;23;08 - 00;12;50;11
Unknown
Don't just leave them hanging around out there. Make sure that they're in someplace where it's not that easy to get to. Yeah, something that's encrypted, password ID, something like that. so, you know, the objective is, is just keep the records that you need and make sure that they're accessible. If you keep just what you need and it's easily accessible, then doing a lot of this financial planning stuff and financial management gets a lot easier, because really, a lot of the people get overwhelmed by looking for stuff.
00;12;50;11 - 00;13;06;10
Unknown
It's not it's not the actual financial planning stuff. It's just looking for stuff. So use this opportunity to do some spring cleaning and get yourself a little closer to that situation where everything is easily accessible and you just have what you need.
00;13;06;13 - 00;13;41;04
Unknown
Your retirement is at risk, not from the stock market, not from inflation. Taxes are putting your retirement at risk. I'm certified financial planner Steve and I specialize in helping people create low tax retirement. Unmanaged taxes can take 30, 40, even 50% of your retirement income. Learn how to defend yourself against excess taxation. Our complimentary webinar will cover all the principles you need to know to protect your money for you and your family, and keep it away from the government.
00;13;41;06 - 00;14;02;19
Unknown
This free webinar will cover how taxes are different in retirement. The taxes you pay in retirement that you don't have to pay during your working life. How to move tax savings into a tax free environment. The widow's tax, the Secure act, the Secure act 2.0 and what they mean to you. The webinar is free, but you have to register to save your spot.
00;14;02;19 - 00;14;36;06
Unknown
So go to Focused Wealth advisors.com/webinars and find out more and sign up right there. Even if you're not planning to retire for the next 5 or 10 years, this information will be critical for you. The longer you have to put the strategies into effect, the more you can accomplish. That's focused wealth advisors.com/webinars to find out more, and to sign up today and get yourself a nice feather duster and dust the office as well.
00;14;36;06 - 00;15;00;25
Unknown
Make sure that all those nasty dust mites have left. Exactly. I don't know, talking about, what's your 30 minute action item? 30 minute action item. Pull your financial records together. Pull them together. Thanks again, Steve, for all that wonderful information. My name is Scott Fitzgerald, and you've been listening to 30 Minute Money, three Zero Minute Money. Find us on all the podcast platforms like, share and subscribe.
00;15;00;25 - 00;15;27;20
Unknown
We will very much appreciate it. Steve can be found at FocusedWealthadvisors.com. And we will see you next time. 30 Minute Money.