Time for a Financial Spring Cleaning

Although you may currently be focused on the looming deadline for filing taxes for 2011, we’ll soon find ourselves at the mid-point of 2012. Accordingly, spring’s a great time to get your financial house in order with a mid-year checkup.

  • Construct your balance sheet. Take inventory of your assets held in brokerage and savings accounts, college savings and 401(k) plans, insurance policies, and real estate. How have your stocks, bonds, and mutual funds performed relative to their benchmarks? Has there been a change in your home’s value? Next, list your liabilities including your mortgage, auto loans, and credit cards. This exercise always generates a to-do list: Shop for a higher rate on a soon-to-renew CD, increase your 401(k) contributions, or attack consumer debt.
  • Check your emergency fund. Today’s uncertain economy underscores the wisdom of keeping at least six months of your current income in a liquid, conservative investment so you can manage an illness, unemployment, or the unexpected car repair without tapping into investments or retirement savings. If you dipped into your emergency stash last year, replenish it to reflect your current income.
  • Evaluate retirement savings. Have you increased your 401(k) contributions to keep pace with your salary? Minimally, you need to be contributing enough to maximize your company’s matching dollars. Many companies that stopped matching funds during the peak of the financial crisis have re-instituted the program, so make sure you’re not leaving money on the table.
  • Evaluate your health benefits & insurance. Fall’s often the time for open enrollments for health plans. Get a head start on assessing your needs. Is your current plan still the best choice? Additionally, review your life, homeowners/renters, and auto insurance to ensure you have adequate protection.
  • Consider consolidating investment accounts. If you have multiple 401(k) plans from old jobs, rolling those funds into one Rollover IRA could be advantageous. Consolidating your accounts not only cuts down on maintenance fees and paperwork, but you can take advantage of more investment options.

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