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The Nitty Gritty

Spring Cleaning for Your Finances

The freshness of spring motivates a lot of people to throw open the windows and doors, and do a thorough spring cleaning. It’s a great way to take stock of what you have, organize it so everything’s more accessible, and ditch the clutter that’s keeping you from enjoying your space. While you’re at it, why not dive into a bit of spring cleaning for your finances, too?

Check Your Tax Withholding
You just filed your income taxes. If you got a big tax refund, that’s the good news and the bad news: good that you didn’t have to write a check to the IRS, and bad because a big refund means you overpaid. Basically, you’ve been shorting your take home pay to give the government an interest-free loan. So, examine the personal allowances you claimed on the W-4 form you completed for your employer. If you’re consistently getting big tax refunds, it’s likely you’re claiming too many allowances and, thus, having more money than necessary withheld from your paycheck.

Review Insurance Policies
You want to make sure that you have the right types and amounts of coverage. For example, you may have purchased a home or gained other assets since you first took out your auto policy. If so, it may be wise to increase your liability coverage. It may cost you more in the short-term, but you’ll be glad you had proper coverage if you need to make a claim. On the flip side, if you have auto and home policies with different companies, you may be paying too much. Oftentimes, you can save by bundling both auto and home insurance policies with the same company.
 
Evaluate Your Credit Cards
If you’re carrying credit card balances, you should commit to a strategy to pay off that debt. You have several options to consider. One is to transfer balances to a lower interest card, but be sure to consider transfer fees along with the rate when evaluating lenders. Most credit card issuers charge a fee of 3% to 5% to transfer a balance to their card, which can add up to hundreds of dollars in fees depending on the size of your card balances.  Another option is to get a personal loan with a low, fixed rate and set repayment term. If you own your home, you could use the equity to pay down your balances at a much lower interest rate. And remember, don’t close those old credit card accounts, because that could ding your credit score. Instead, once you’re free of credit card debt, use all of your cards periodically to keep them active, and discipline yourself to pay off all your balances each month. 
 
“Regardless of which strategy you choose to eliminate high-interest rate debt, creating a spending plan for managing your day-to-day expenses is critical to avoid falling back into debt in the future,” said Ryan Keene, Ardent’s VP of Lending.  “If you need help creating a budget, I’d suggest checking out the free financial education resources provided by your credit union.”
 
Consolidate Retirement Accounts
If you’ve been fortunate to work for companies that offer 401(k) retirement plans, you may have accumulated several accounts that are sprinkled among various employer-sponsored plans. While diversifying your investments is always a good idea, it’s easier to manage them if they’re consolidated in one place. You have a few options. You could leave the funds in the current plan until age 70.5. Your current employer may allow you to rollover other accounts into your current 401(k), but only do that if your current plan offers low fees and solid investment choices. You can also roll over those old 401(k) accounts into an Individual Retirement Account (IRA), where you have a broad range of low-cost investment options. Just be sure you do a direct rollover, so you don’t incur any tax penalties.
 
“There is no best choice,” said John Trezza, of Ardent Investment and Retirement Solutions, a CFS licensed financial advisor. “It’s an individual decision, but you should be sure of the consequences.”