Even with the economy in flux, you can still create order for yourself by getting your finances in shape.
"It's always a good time to revisit your financial goals at least once a year," says Matt Rosenberg, CPA/PFS, member of the American Institute of CPAs' Financial Literacy Commission. "A kind of spring cleaning."
Here are some top tips from experts to help you refresh your money situation right now.
Look for the repeated charges on your credit cards, suggests Chad Parks, founder and CEO of Ubiquity Retirement + Savings. "You might have signed up for a teaser program on a subscription and you forgot to cancel it," he says. "They're counting on you to forget about them. It's kind of tedious work, but when you add it all up over the years that can be a lot of money."
You might not even be using the services you signed up for anymore, Rosenberg says. "It's so common that they'll offer one month for free or a trial version, that when you sign up you don't realize that cost has been carrying forward now. ... So maybe I signed up six months ago and haven't used it. It's been charged to my account, and it could be $12 or $15 a month so you're not really noticing. You clean that stuff up and maybe save a couple hundred dollars a month."
"As simple as it sounds, you will be very surprised at how many people don't have an actual budget," says Parks. He notes that you may be set up for auto payment or writing checks without thinking. "It just all sort of happens. You don't actually know how much you're making and how much you're spending and what the difference every month is."
Parks says sitting down to go over what's coming in and going out can be eye-opening. "It's those little things that you don't think are a lot of money, but then if you look at it over a period of time, a year, two years, three years, you'll realize, 'Wow, I actually spent a lot of money in that category,' and then you can ask yourself, 'Was it worth it?'"
If you're one of the many who has been affected by a job loss, having a better understanding of where your money is going can help you make a plan to move forward.
After you've set aside your short and long-term savings, emergency needs, and essentials, "hopefully it's a positive number," he says. "And with that positive number, that's your 'Go have fun' money. It empowers you, because you can really truly guilt-free enjoy your spending money, because you've done everything else. And that's really liberating."
Make sure you're getting the most from your accounts, too, Rosenberg suggests: "That could mean 'I have some excess cash sitting in a savings account, and do I have more than I need in there? And maybe I should be putting that into a longer term investment allocation.'"
Check whether you've maxed out your IRA contributions, and if you're contributing as much as possible to your 401(k). You can ask yourself: "Am I accumulating excess cash [in other areas]? So maybe I could up my contributions," he says.
When approaching your long-term savings goals, Parks says, remember to be realistic about what's ahead. "We have painted this image of retirement as Nirvana," he says. "It's the gold watch on the beach and your life is good. The reality is that's only for very few select people. Retirement equals permanent unemployment. Think about it that way. And that's where you don't have a paycheck coming in anymore."
Check out your credit report and take stock of your accounts, says Parks. "Take out all those credit cards and credit card statements, or request your credit report," he says. "There might be things happening that you don't know. That's the risk of having identity theft."
The three major credit bureaus — Experian, Equifax, and TransUnion — are offering to generate free weekly reports through April 2021. And Credit Karma offers credit updates throughout the year from TransUnion and Equifax.
You also benefit from seeing accounts you forgot you had, says Parks, which is helpful in case there's an annual fee.
Now is also the time to reassess your debt payments. Parks suggests you look at your loans and see if you can get a better deal.
This is also a good time to strengthen and streamline your passwords, says Rosenberg. "Changing your passwords and coming up with a good system for how you set passwords is really important," he says. "A lot of people end up with 50 or 100 different usernames and passwords, so they'll start writing them down and leaving them on desks or leaving in places that can be compromised."
Rosenberg suggests having three passwords: a difficult one that has letters, numbers, and symbols, and isn't a word, for things that have sensitive information, like tax returns or investment statements; a second one that could be easier to remember, for things like online shopping; and a third one for sites with no personal information, such as an app to log bike riding miles.
He recommends changing the hardest one more regularly, and keeping a list of which site has which password. "That way I'm not worried about having to write things down because they'll all be the same. So when I change them, I go through and change them all at once."
While you'll generally want to save your tax returns for three years, and seven if you're claiming complicated losses, you can get rid of easily replaceable things like bank and credit card statements, utility bills, ATM receipts, and credit card receipts. "Go to your bank or just pull it up online," he says. Once you've checked for any fraudulent charges, you should be fine shredding the papers before throwing them out.
You risk losing a document if you only have it on paper, Rosenberg says, and digital storage is more efficient. "When I get my auto insurance stub every six months, I don't keep that in my car anymore," he says. With digital, if you get pulled over, you don't have to scramble to find your old paperwork. "Now you can receive that insurance card, scan it, and put it on an electronic format, and it's always up to date."
Keep paper files for your estate planning documents and trusts, your will, your birth certificate, title policy for a car, Social Security card, and maybe some medical records. "I would recommend keeping those probably not in a file cabinet, but in some sort of fireproof safe or or a safe deposit box," he says. "Somewhere that it's not going to be at risk."
Ask yourself these questions when choosing whether to keep paper documents or whether to shred them, Rosenberg says: What might I need this for in the future? When would I need this? How easy or difficult will it be to recover or substitute this if I need it?
Start with the basics and congratulate yourself along the way, Parks says. "Do that inventory, trim unnecessary expenses, and give yourself accolades for that," he says. "There's not much immediate gratification in saving for retirement. It's short-term pain and no reward. But if you are doing a budget and setting milestones: 'Hey, I did it, and it gave me confidence to do more.'"
He suggests starting with first looking at your earning versus spending. "Just do that and feel good," he says.
If you've got energy and are building momentum, then you can look at your retirement goals and midterm goals: saving for a trip, saving for a car, saving for a down payment on a home.
"Don't overwhelm yourself, because then you're a deer in the headlights and you're back to doing nothing, which is worse," he says. "It'll be slow and subtle. You won't necessarily recognize it, but give yourself time and you'll see the difference."
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