Financial Housekeeping: 9 Items To Clean Up At The Start Of The Year

Early January is a common time for individuals and households to prepare for the year ahead by tackling financial housekeeping tasks. Performing a quick check-in on your financial life to make sure your money and life goals are in alignment helps set your money mindset and keep your finances in order.

Here are nine important financial housekeeping tasks to review and clean up at the start of the year.

1. Update your beneficiaries

Reviewing your designated beneficiaries is often overlooked and can have unintended consequences for your assets and loved ones if forgotten. When it comes to who will inherit your assets, the beneficiary on file with the admin of the account will get the money, not who is listed on your will. Can’t remember who you set as your beneficiary? Check all of your accounts – such as your checking and savings accounts, qualified retirement accounts like an IRA or 401(k), and certificates of deposit – to ensure your designations are up to date, working with a trusted advisor or estate planning expert if needed.

2. Look at your cash

As part of your money management strategy, it is necessary to have a balance of liquid and non-liquid assets to accommodate both your short- and long-term goals. Liquid accounts give you easy access to funds that are not locked away. Now is a great time to review your liquid accounts and make sure your dollars are working for you. Review your checking, savings, and money market accounts to make sure you’re receiving competitive rates and services that match your needs. It can be helpful to compare interest rates offered by different financial institutions so you can maximize your returns.

3. Check your emergency fund

We’ve all experienced unexpected financial emergencies. Having an emergency fund is an essential way you can protect yourself. Check on your emergency fund and make sure it still holds enough assets to cover any unexpected expenses that may arise this year. Generally, a healthy emergency fund holds around three to six months of your living expenses.

4. Review IRA contributions

If you’re saving for retirement, maximize your tax advantages and avoid unexpected consequences by checking once a year to see if the IRS has made any changes to the rules for individual retirement accounts (IRAs). Consult with your tax advisor to understand your options.

5. Check your interest rates

Don’t let your savings sleep in a low-rate account. It’s sound practice to periodically check the interest rates that you’re earning on your certificates of deposit (CDs) and other high-yield savings accounts. Use online rate comparison sites such as CD Valet to compare CD rates offered across financial institutions (oftentimes, community banks and credit unions offer better rates than the national players) to guarantee you’re receiving the best rate possible and maximizing your returns. With the yield curve returning to normal from an inverted state, you may now find more competitive rates offered for long-term CDs.

6. Go paperless

There are a number of major benefits to opting out of receiving paper statements and receiving them electronically instead. In addition to the environmental benefit of cutting down on paper, typically e-statements are available sooner than traditional statements sent by mail. Paperless statements also offer enhanced account security and protection from identity theft, as it decreases the risk of your statement being lost or stolen in the mail.

7. Finalize your charitable donations strategy

Deciding on the smartest strategy for your donations takes thoughtful planning. Review your approach for your charitable contributions for the year so you can maximize your charitable impact while maximizing available tax benefits. Consult with your financial advisor to determine the strategy that makes the most sense for you. 

8. Review your mortgage

If you have a home mortgage, a mortgage review can spotlight savings opportunities and give you a jump on current market conditions. If you’re looking to buy a new or second home or refinance in the coming year, you could consider moving funds into more liquid accounts, so they are ready when you are ready to purchase.   

9. Revisit and refresh your financial plan

As a seasoned saver, you can benefit from a financial checkup. Take a moment to assess your current strategy and identify opportunities to fine-tune it. Review your budget to ensure it still aligns with your goals and evaluate whether your long-term plans reflect any recent life changes or market shifts. Adjusting your approach at the beginning of the year can help focus your money mindset and ensure that your finances are in good shape for whatever comes your way.

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