Financial wellness includes taking steps to declutter and organize your financial life. Many tools and resources make spring cleaning your financial house more manageable and efficient. We will cover a few areas you can focus on.
Digital Financial Organization
Moving your financial life online has become the preferred method for many. It can be more convenient while helping to manage the clutter of physical mail and stacks of paper on your kitchen counter. Online bill pay, digital account statements, and electronic documents are commonplace.
While streamlined digital access has many benefits, one downside is the proliferation of passwords you need to remember. Technology can also help with this. Password managers are available online to help you keep track of your complex and varied passwords for each key account.
While doing your financial spring cleaning, it’s also a good time to review and update those auto-payments if necessary.
Fraud Protection Checkup
Spring is also a good time to review the security of your identity and personal data, especially when using online accounts.
Security can be a real problem. A 2024 Federal Trade Commission (FTC) study showed that consumers reported losing more than $10 billion to fraud in 2023, marking the first time that fraud losses have reached that benchmark. This statistic marks a 14% increase over reported losses in 2022.1
To help protect yourself, consider monitoring your financial accounts regularly for suspicious activity, especially during tax season.
Use Strong Passwords and Two-Factor Authentication
You can attempt to enhance your online security to protect sensitive information by using strong, unique passwords, enabling multi-factor authentication, and regularly changing passwords.
Empty Your Mailbox Frequently
Don’t let your physical mail sit uncollected for too long. A low-tech way criminals can steal your identity is to simply take bank or credit card statements, utility bills, health care or tax forms, or pre-approved credit card offers out of your mailbox. As you declutter, consider buying a household shredder and destroying sensitive paperwork containing personally identifiable information.
Use Unique Passwords
Create different passwords for your accounts. According to the FTC study, secure passwords tend to be longer, more complex, and unique. Many people use the same password for multiple accounts, which could be problematic. You should consider creating different passwords for various accounts and avoid using information related to your identity, such as your pet’s name, your birthday, your initials, or parts of your name.2
The FBI and the National Institute of Standards and Technology have issued guidelines stating that passwords should consist of at least 15 characters because these are more difficult for a computer program or hacker to crack. Regarding security questions, the FTC’s guidelines suggest questions that only you can answer; avoid information that could be available online, such as your ZIP code, city of birth, or mother’s maiden name.2
Account Consolidation
Streamlining your financial life can include combining old or forgotten retirement accounts. Accounting for all your assets and having them in one place can help you and your financial professional develop more comprehensive investment and retirement income strategies.
Surprisingly, losing track of an old retirement account happens more often than you might think. As of May 2023, there were over 29 million “left-behind” or “forgotten” retirement accounts in the U.S., holding nearly $1.65 trillion in assets.3 Whether or not the balance of a forgotten account is large, this can be “found money.”
Also, remember to look for other long-dormant accounts that can be consolidated, and inactive or redundant credit cards that can be canceled.
Beneficiary and Insurance Checkup
Use this annual opportunity to update your beneficiaries on policies and retirement accounts.
Not reviewing your beneficiaries on retirement accounts and other key contracts and policies can result in unintended consequences. Typically, a beneficiary designation overrides any instructions detailed in a will. For example, you may leave everything to your spouse in your will. If your children are named beneficiaries on your retirement account at your passing, the retirement account designation might supersede anything written in your will. As a result, the money in that account could be transferred to your children instead of your spouse.4
Beneficiaries listed on an account opened long ago may not reflect your current circumstances and may no longer match your estate goals. This can be true in the case of divorce, the birth of a child, or the death of a beneficiary. So, including a review as part of your spring cleaning is good.
Working through these spring financial cleaning tasks will help you keep your finances in check now and in the future.
Sources:
1. Federal Trade Commission, February 9, 2024 https://www.ftc.gov/news-events/news/press-releases/2024/02/nationwide-fraud-losses-top-10-billion-2023-ftc-step s-efforts-protect-public
2. U.S. News & World Report, May 4, 2024 https://www.usnews.com/360-reviews/privacy/identity-theft-protection/10-ways-to-prevent-identity-theft
3. Capitalize, June 23, 2023. Once you reach age 73, you must begin taking required minimum distributions (RMDs) from your 401(k) or any other defined contribution plan in most circumstances. Withdrawals from your 401(k) or any other defined contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal The following is an exclusive content sample from our Do It For Me offering. Connect with us to learn how “Do It For Me” can help you save time! income tax penalty. https://www.hicapitalize.com/resources/the-true-cost-of-forgotten-401ks/
4. Trust&Will, December 2024 https://trustandwill.com/learn/beneficiary-designation-vs-will
