Spring Clean Your Finances: It’s Never Too Early

Key Takeaways   

• Now is a great time to simplify your financial life.  Spring clean your finances

• Merge old retirement plans, unused bank accounts, and redundant brokerages to simplify oversight and reduce fees. 

• Review your life insurance, homeowners insurance and long-term care insurance regularly as your lifestyle and family circumstances evolve. 

• Ditch outdated rules of thumb. Retirement age, savings rates, and debt payoff timelines should be personalized, not rigidly followed. 

With a brutal winter finally in the rearview mirror, our thoughts naturally turn to getting outside, making a fresh start and doing some spring cleaning of the house and yard. While you’re busy tidying up the house and yard, it is also the perfect time to declutter our financial life. 

Consolidate and Simplify 

One easy chore is getting rid of old checking or savings accounts that you’re no longer using or that are paying little or no interest. It’s also a good time to consolidate retirement plans you may have from former employers and to prune your redundant brokerage accounts.  

The danger of “forgotten” retirement accounts is twofold. First, your beneficiaries may be out of date, and second, you may be incurring administrative fees for reasons you no longer remember. Moving your assets to a single platform simplifies your oversight and ensures that your strategy remains cohesive.  And while you’re at it, get rid of all those subscriptions you’re not using. See our post about cancelling unnecessary subscriptions. 

Insurance Cleanup 

Insurance is something that evolves over time; it’s not a set-it-and-forget-it exercise. As your lifestyle and family circumstances change, your insurance policies should be reviewed on a regular basis, preferably by a financial planner, not by a commission-based insurance agent.  

When people are underinsured, they’re exposing themselves to risk in three important areas: (a) Life insurance, (b) property & casualty, and (c) long-term care. When we do an insurance review, we will give you a recommendation for coverage. We'll do a complete analysis of your income, time to retirement, potential tuition bills and outstanding mortgage amount(s) -- all the major obligations you must pay off in the foreseeable future. If we find you need $3 million of coverage and only have a $500,000 term life policy, then you’re way underinsured. If something happens to you, and your family loses its income, your spouse won’t be able to meet those obligations or reach their retirement goals.  

I once worked with a couple worth over $5 million and discovered they had a bare bones auto policy with maybe $25,000 of liability coverage and no umbrella liability policy. I warned them they were dangerously underinsured and exposing themselves to a lot of potential liability. They could be wiped out in the event of an accident, but the husband told me he wasn’t worried, because he and his wife were “very safe” drivers. When I explained he could get the coverage he needed for roughly $1,000 additional a year, he finally came around.  

Long-term care (LTC) is another area where we find new clients are underinsured. LTC has become prohibitively expensive and studies show 70% of Americans turning age 65 today will require some form of long-term care (LTC) services and support in their remaining years. Yet, only 3 percent of all U.S. adults and only 15 percent of those aged 65+ have long-term care (LTC) insurance. Medicaid is not a realistic option for most middle-income or upper income families, so the alternative is either LTC insurance or trying to self-insure. Certain clients have the ability to self-insure while others would greatly benefit from obtaining a long-term care insurance policy. Either way this important risk needs to be addressed. 

Pruning Investments 

People often come to us with a portfolio full of stocks they inherited years ago and can’t explain why they still own them or how they factor into their portfolio. Holding on to stock for sentimental reasons is not a good use of one’s money. Instead, we recommend creating a plan to de-concentrate those positions  and move into new positions that are better diversified.  

Beneficiary Designations 

Life is complicated and constantly changing with marriages, divorces, new kids arriving, deaths in the family. If it’s been a while since you last reviewed your beneficiary designations for your retirement accounts, brokerage accounts, bank accounts, insurance policies etc., chances are some of them are out of date. It's time to look through those designations to make sure they're all cleaned up and that they match your wishes and your will or estate plan.  

For a deeper look at why this step is so critical, we encourage you to read our article, Essential Estate Planning: Avoiding Common Mistakes. It highlights how beneficiary designations can override your will and shares real-world examples of how outdated forms can lead to unintended outcomes—reinforcing why this simple review is such an important part of your financial spring cleaning.

Disregard Outdated Rules Of Thumb 

Another type of spring cleaning is psychological more than physical. For instance, many people believe they must strictly follow rules of thumb such as retiring at age 65, or saving 10% of every paycheck, or paying off all of their debt, including their mortgage, before they start investing. Rules of thumb don’t necessarily apply to everyone’s situation as they age and get closer to retirement. Everyone’s situation is different and not taking that into account can lead to poor decisions.  For starters, age 65 is just a starting point for leaving the workforce. You should not retire until you're absolutely ready to retire. I have some clients who love their work and even at age 70-plus have no interest in wrapping up their careers. I have others who are well-off financially but completely burned out in their early to mid-50s and they have no intention of waiting until age 60, much less 65 to exit the working world. It all depends on your lifestyle, your career satisfaction, your level of retirement savings, and how that money is invested.  

Disregarding those old rules of thumb will eliminate a lot of stress and anxiety. That’s why we take a highly customized approach to our clients’ retirement timely that’s carefully aligned with their lifestyle and values.  

Conclusion 

As you head into spring, here are three things to keep in mind as you refresh your financial life. 

1. Be aware of your cash flow. I’m not talking about a strict budget; just make sure you have a handle on what’s coming in and what’s going out in your financial life.  

2. Have a written financial plan. The plan gives you direction in terms of the goals you’re trying to achieve, what your priorities are and the trade-offs you may have to make. We design our plans to be flexible, so they can change as your life circumstances change.  

3. Strive for simplicity. Consolidate redundant accounts. This frees up mental bandwidth and makes things easier to manage overall.  

If you’re not sure where to begin, our article How to Kickstart Your Financial Spring Cleaning offers a simple, practical framework to get started. And as always, if you or someone close to you would like help with spring cleaning or ongoing financial maintenance, feel free to reach out anytime, we’re happy to help.

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DAN SATZ MS, CFP® is a Partner at Novi Wealth .