It’s around this time of year when we realize that winter has caused us to collect some clutter around the house, and that the windows and carpets could use a good cleaning. These things jump out at us, since it’s easy to see a stain on the rug or magazines piled up in a basket.
What we sometimes don’t see though is other clutter that we’ve built up — specifically, how we manage our money. These messes can start out small enough, but over time and without much oversight can become much more unruly and costly.
That’s why, just like periodic cleaning, it’s important to check in with your budget and investments from time to time, and if necessary get help from a financial professional. To get started on cleaning up your finances this spring, here are a few areas where you can begin the tidying process.
[See: 8 of the Most Incredible Investments of the 21st Century.]
Maintain a diversified portfolio. Think of trying to accomplish cleaning your kitchen with a mop, rag and window cleaner spray bottle. It would get some things clean, but what about the countertops? Or the stainless steel fridge and stove? The point here is that different jobs require different tools or products. In the financial sense, it would be like investing in only a 401(k) and some stock in your overall portfolio.
What a financial advisor can do is not only tell you what other products are on the market to fill in any gaps you may have, but they can also teach you the best way to utilize each or even go a different route altogether. For example, in recent times, having money in bonds or simply in cash has not yielded much in the way of interest. The novice investor may look at that and think to put everything else in the stock market for the chance at a greater return. The financial advisor would say “not so fast,” as there are numerous options available to help diversify, from paying down debt, focusing more on college savings for your children, or even investing in a rental property.
Much like cleaning with the right brush or cleanser, diversifying in the products that help fit your needs can make a huge difference in the outcome.
Don’t spend more than you can afford. While this may sound obvious, it’s surprising to see how easy it can be to get off track with spending. That’s why it’s important to create a budget and stick to it. It doesn’t have to be anything complex either, as all a budget really does is help us understand what’s coming in and what’s going out. Also, from a savings standpoint, not budgeting and just “putting money away when you can” is almost like cleaning your bathroom when you feel like it. For best results, we know that this needs to be done on a consistent basis.
If we have trouble with this, a financial planner can help us figure out what our spending parameters should be and set up a system to help us stay on track. He or she can also help us implement strategies such as “pay yourself first” or simply provide nudges to check your online credit card account weekly to help track spending. And in terms of a recording system, many times it can be solved by something as simple as inputting your purchases an income into a spreadsheet.
[Read: 3 Reasons Not to Try Shorting Stocks.]
Saving for retirement. Just like the leaves and yard debris that collect during the winter that need to be dealt with, the need for money in retirement can grow quickly. Also remember that it’s never too early to start planning for the time when you won’t have to set the alarm clock anymore.
That’s why it’s important to talk to a financial planner about different investment vehicles that fit your situation, be it your 401(k), or perhaps establishing a Roth IRA, among others.
Maintain consistent investment behavior. Lastly, a reason why we have to do so much spring-cleaning in the first place is because we let the cleaning and organizing get a bit lax over a few weeks or months. It’s not so much that we don’t know how, but that our behavior gets the better of us. Whether it’s a way to sort and give away excess clothing or how you fund your contingency savings account, setting up a system is ideal for helping you in both situations because it takes the emotion out of the equation.
What a financial advisor can do in this case is help you understand how emotion plays a role in investing, and help set up ways to combat it. For instance, just because the markets sometimes fluctuate wildly doesn’t mean that your investment strategy should. For long-term investors, market breathers can be a chance to review their game plan.
For many, recent market downdrafts have been a good reminder of the discomfort volatility can cause since we have been lulled into complacency the past few years. These periods are a good time for investors to take stock of portfolio risk and make sure their portfolio adequately fits their investment tolerance and time horizon. Long-term savers should keep their head down and save through these dips and stick with the fundamentals like a good diversified approach, regular rebalancing and working toward a healthy household balance sheet.
So as you can see, just like wiping down some grime from the kitchen counter or mopping the floors can make a big impact on the cleanliness of your home, it doesn’t take a whole lot to make big changes to your financial state as well. And with the help of a financial planner, you can help ensure that you’ll be in better financial shape and have some professional help with cleaning up your money situation.
[Read: The Incredible Shrinking World of Investments.]
Securities offered through SII Investments (SII), member FINRA, SIPC. Advisory services offered through Scarborough Capital Management (SCM), a registered investment advisor. SII & SCM are separate companies. Neither SII nor SCM provide tax or legal advice. Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Diversification and asset allocation do not guarantee positive results. Loss, including loss of principal may result.
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4 Spring-Cleaning Tasks for Your Money originally appeared on usnews.com
