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Spring Cleaning? Don’t Forget Your Finances

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Spring is right around the corner, which means it’s time to come out of hibernation and do some tidying up before summer hits. Along with organizing the basement and cleaning out your closet, why not set aside some time to review the status of your finances as well?

Even if you keep a fairly tight budget, it’s still worthwhile to do regular financial check-ups to make sure you’re on track to meet your goals. To help you get started, we put together a financial spring cleaning guide.

Step 1: Address spending

Fine-tune your budget. A budget is a plan for your money, but even the best laid plans have a tendency to go awry. A regular budget check-in can help you stay on top of your spending behavior and make any necessary tweaks. If you don’t already have a budget, check out our guide to help you get started.

Commit to cutting back on excess food shopping. “The common budgeting offenders are grocery stores and eating out,” said Ryan McPherson, CFP® and director of coaching at financial education company SmartPath. The problem isn’t the cost of each grocery or restaurant bill, according to McPherson — it’s usually the frequency of food shopping. Here’s a tip: try listing out the number of times you went to the grocery store or ate out in the last month. Divide that number by four to figure out how many times you spent money on food each week. Then, make it a goal to go to the grocery store or out to eat one less time per week. Keep reducing your visits slowly until you’re at a point where your food spending is where you want it to be.

Compare providers. Shop with competitors to see if you can get a better deal on services like cable, internet or insurance. Ask your current providers if the prices you find can be matched, or consider making the switch to more affordable companies to lower your bills for the rest of the year.

Step 2: Ramp up saving

Check your savings account and come up with a savings plan. The target for liquid emergency savings is generally three to six months worth of household expenses. According to McPherson, if you need to beef up your savings account, don’t to think of it as needing to save another $1,000. “That’s an overwhelming amount for most people,” he said. Instead, he recommends dividing the amount you need by the next 12 months. This will give you a manageable amount, like $100 to $150, that you can set aside monthly until you reach your goal. Store that money in a high-interest savings account to boost your returns.

Automate your plan. “Automating anything in personal finance is going to lead to better results and habits,” said AJ Ayers, head of operations at financial planning company Brooklyn FI. Set up automatic contributions from checking to savings so you don’t even have to think about it. Ayers also recommends keeping your savings and checking at separate banks so you’re not tempted to spend your savings or withdraw it from an ATM. Automatic saving apps like Joy and Qapital are extra tools that can also help you ramp up your savings.

Bump up your retirement contributions. McPherson told MagnifyMoney that a good goal is to sock away at least 20% of your gross pre-tax household income for retirement. The 20% includes the contributions that both you and your employer are making. Spring is a great time to reassess and potentially boost your contributions for the rest of the year. Don’t forget to take into account any promotions or bonuses when thinking of ways to increase your contributions.

Step 3: Legacy Planning

Write a will or update your existing one. Death is a morbid topic, but it’s a reality that many fail to plan for. You may need to update your will if you’ve had a change in assets or a change in your family situation. Here’s a guide to help you get your estate plan in order, including information of creating wills and designating a power of attorney.

Update your beneficiaries. You don’t want to end up in a situation where the wrong person gets your cash. When you pass away, retirement accounts are paid out based on your beneficiaries and not based on your will, said McPherson. Say you get divorced, then you get remarried, and then you die before changing your beneficiary. If your ex is still listed as the primary beneficiary on the account, the money could go to them regardless of what you designate in your will. After any life event (e.g. marriage, divorce or having a child), you should update your beneficiaries to make sure your money goes where you want.

Consider life insurance. In the event of your death, life insurance offers a source of funds to the people who depend on you financially. Without it, family members could be left struggling to pay for funeral expenses or day-to-day necessities. Now’s a good time to look at your policy and consider whether or not the coverage is appropriate and whether or not you need to make any changes.

Step 4: Review your taxes

Settle your bill. At this point, you should have all the documents you need to complete your tax filing. “If you owe money and you can’t pay your taxes, do not delay. Get out in front of it right now,” McPherson said. Contact the IRS to get on a short- or long-term installment plan. When you owe money, Uncle Sam will either work with you or against you. The IRS has almost unlimited power to reclaim what you owe them, according to McPherson — ignoring your tax bill will only lead to bigger problems.

Decide how you’ll use your refund. If you’re getting back a refund, come up with a plan for how you’ll use that money. Instead of splurging or just sitting on the extra cash, put that money to work by boosting your emergency savings or paying off excess debt. A plan will help you stay on track and prevent you from squandering your refund.

Check your withholding. McPherson recommends checking your withholding annually, especially if you’ve experience a major life change during the year. Did you get married or divorced? Did you have your first child? Did you have another child? Fill out a new W-4 and submit it to your employer.

Step 5: Consider credit concerns

Pull your credit reports and scores. Review your credit reports every so often to check for mistakes or other red flags. “[Negative records] could be the result of your habits or of someone stealing your identity,” said Ayers. You’ll want to nip both — poor habits or fraud — in the bud. We’re also all entitled to one free credit report from each bureau annually, and you can get your reports at www.annualcreditreport.com to review. But while your free annual reports doesn’t come with a credit score, you can get one for free at LendingTree. Disclaimer: MagnifyMoney is a subsidiary of LendingTree.

Dispute records. Circle items on your credit reports that are inaccurate or incomplete. File a dispute with the credit bureau and the reporting creditor. The dispute filing will trigger an investigation; records found to be incorrect or incomplete will either be removed or updated. You can make disputes online, or you can send in a letter. Here’s everything you need to know about disputing a credit report.

Develop a plan to improve your score. There are five key factors that determine your credit score: payment history, credit utilization, length of credit history, kinds of credit and new credit inquiries. The most influential are your payment history and credit utilization, so if you’re trying to boost your score, start there. Set up automatic payments so you don’t accidentally miss a due date, and decrease your credit utilization by focusing on decreasing your debt. You can also try calling your credit card companies to see if they’ll raise your limit, Ayers said.

Bottom line

It doesn’t feel like spring yet for a good part of the U.S., but, thankfully, it’s coming soon. These steps can help you force your finances out of hibernation and prepare you for a sunny and financially stable summer.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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Federal Student Loan Rates to Ease Back Down for 2019-2020

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

After back-to-back increases in the previous two summers, interest rates for federal student loans are headed lower for the coming year.

Congress sets federal student loan rates each spring, based on the yield of the benchmark 10-year Treasury note, and the new interest rates go into effect on loans disbursed from July 1 onward.

While the Department of Education had yet to post the new rates on its site, news reports put the decreases for July 2019 to June 2020 as:

  • Undergraduate Direct Subsidized and Unsubsidized Loans: 4.53% (down from 5.05%)
  • Graduate Direct Unsubsidized Loans: 6.08% (down from 6.6%)
  • Graduate PLUS and Parent PLUS Loans: 7.08% (down from 7.6%)

Federal loan interest rates last declined in July 2016, with the undergraduate direct loans falling by about half a percentage point to 3.76%, for example.

Federal student loans also come with loan origination fees, but those generally change in October. For the 2018-19 period they were:

  • Undergraduate Direct Subsidized and Unsubsidized Loans: 1.062%
  • Graduate Direct Unsubsidized Loans: 1.062%
  • Graduate PLUS and Parent PLUS Loans: 4.248%

For more on the true costs of federal student loans, check out our complete guide, including all the various types of loans and strategies for repayment.

This report originally appeared on Student Loan Hero, which like MagnifyMoney, is part of LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

MagnifyMoney
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