It is common practice to participate in a spring cleaning exercise around the house, getting rid of what you don’t need or use and making sure your space is a place that is comfortable and represents your lifestyle. The same should go for organizing your finances. Spring is a good point in time to review your financial situation and make sure your savings, investments and money-related documents are aligned with your circumstances and goals.
Review your portfolio. The natural toll of our busy daily lives, in addition to regular market swings, various macroeconomic events and an ever-changing news cycle, can sometimes leave investors unsure of exactly where their portfolio stands versus the same time last year.
If you haven’t already done so, now is a good time to review your portfolio and ensure it is aligned with your risk tolerance and time horizon, as well as consider how to use any cash you’ve kept on the sidelines. Economic conditions remain solid, inflation and interest rates are in check, and we’re continuing to see higher valuations and strong earnings for companies that are often key players in passive exchange-traded funds or investors’ individual portfolios (FANG stocks, for example).
[See: 10 Tips for Keeping a Cool Head in a Market Meltdown.]
Despite the return of some volatility and constant headlines out of Washington, now may be a good time to buy. Consider whether you are willing to invest more, rather than fearfully sitting out on the sidelines, so that you don’t end up missing out on a growing world economy. A properly positioned, long-term investment strategy should be able to withstand any potential market downturns.
Use your tax refund wisely. A tax refund is widely perceived as a windfall, leading many people to spend it on frivolous items. While some purchases, such as a vacation, can be important to your well-being, think about how you could use the extra cash to improve your financial situation.
For example, you could use your refund to make an extra payment toward a mortgage, student or auto loan, add to your emergency fund, or lessen the burden of upcoming household expenses.
If you received a tax refund and your financial house is already in order (meaning you aren’t carrying any debt, are contributing the maximum allowed to your retirement plan, and have an adequate savings), you should consider investing that money in the market. As previously mentioned, now may be a wise time to increase your investments.
Update your estate plan. It is generally advisable to review your estate planning documents at least once a year to ensure they are aligned with your current family situation, assets and wishes.
[See: 8 Steps for Investing a Tax Refund.]
Consider looking at your will, trust and life insurance policy with your closest family members and any other heirs to make sure everything is up to date and that each person understands your wishes, what they can expect (at least at a high level), and where each of your accounts is located.
While these are often difficult conversations to have, it is critical to plan for the inevitable and make sure your loved ones are protected. The last thing you’ll want is for them to be confused and overwhelmed with paperwork or unable to carry out your desires.
Schedule a review with your financial advisor. When was the last time you sat down with your financial advisor to review your overall financial plan in-depth? If the answer is more than six months, it’s time to schedule a meeting.
Your advisor can help you ensure that the level of risk in your portfolio continues to match up with your individual financial goals and can also answer any questions regarding how much investable cash you have, or what changes should be made in your estate planning documents.
If you’re concerned about news-driven volatility, speak with your advisor about the advantages of buy-and-hold strategies and ensure that your long-term investment strategy is designed so that you feel comfortable sticking with it.
Finally — and this is a tough one — ask yourself if you feel like you can communicate openly with your financial advisor. If the professional you work with is ever hesitant to be transparent about how he is paid, or you feel he or she is guiding you to products that aren’t a fit with your financial plan and goals, consider looking elsewhere as part of your spring cleaning.
You are the ultimate steward of your finances, and it is important to have a trustworthy and credible partner to help keep you on solid financial ground.
[See: 8 Things Not to Hide From Your Investment Professional.]
In the end, a clean-up of your finances should leave you feeling refreshed and confident that your financial house is in order.
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4 Ways to Give Your Finances a Spring Cleaning originally appeared on usnews.com
