How to De-Clutter Your Personal Finances

Foto: Telemundo Arizona

Summer cleaning doesn't need to be limited to your house and your yard. Just like the bedroom closet or the garage, your personal finances can become cluttered and downright messy. However, a little financial disarray isn't merely an inconvenience -- it can waste your time and cost you money. Get your financial house in order and your mind back on your business this year with the following tips:

1. Clean Files

According to the IRS, most records related to income and assets should be kept for at least three years. However, depending on your situation, there are records you may need to keep longer. For example, you'll need to keep tax records for at least six years if the IRS feels you under-reported your income by 25 percent or more. And statements related to retirement-fund contributions and annual summaries should be kept indefinitely to verify the taxable nature of future withdrawals.

However, paper copies of your monthly bills do not need to be kept longer than one year unless they are related to a business. Also, be sure to shred all documents you discard.

2. Go Paperless

If you still receive bills and other statements in the mail, it's time to go paperless. In addition to receiving statements electronically, utilize a scanner to transfer existing paper records to files on your computer and online via cloud computing. Backing up your data on removable data storage devices is also prudent -- and, depending on the nature of the data, you may want to back up to multiple devices to be stored in separate locations. Just be sure to place statements and bills in an email folder or hard drive location where you won't miss or neglect them, and implement a method to pay them in a timely manner.

3. Adjust Payment Dates

This is a simple but often overlooked task. Contact your credit-card companies and utility providers to change payment due dates to work with your schedule. For example, shifting due dates to a few days after you receive your paycheck can make budgeting easier, as you'll know how much you have left to work with for the remainder of the month.

4. Schedule Automatic Payments

Setting up auto-pay for credit card and utility bills is a great way to stay on top of payments. That said, don't just set it and forget it. If you carry a balance, regularly check the progress you're making on debt payoff and adjust as necessary.

5. Consolidate Credit Cards If you carry balances on high-interest cards, consider consolidating them via a balance transfer to a low-interest credit card. The fee to transfer is usually around 3 percent, which may be made up for by a low introductory APR. If you don't expect to pay off the entire balance, find out what the APR adjusts to after the intro period to make sure the transfer is worthwhile.

Final Thoughts

De-cluttering your finances each year provides an excellent opportunity to perform an annual financial review. Take the chance to revisit your goals and check your progress on long-term priorities, such as saving for retirement and paying off debt. Though tidying your finances can be a hassle, the feeling of peace and empowerment you get from doing it is well worth the effort.

David Bakke writes about frugal shopping tips, budgeting, and investing for retirement on the financial blog, Money Crashers Personal Finance.

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