Spring is officially here, and for many of us that means it’s time for some spring cleaning around our homes and yards. But why stop there? This year, why not do some financial spring cleaning, too?
You can apply some of the same principles of traditional spring cleaning to your financial environment. Here are a few suggestions:
Clear your vision
Spring brings extra hours of sunshine – and to enjoy them, you’ll want to clean your windows, inside and out. As an investor, you also need to take a clear-eyed view of your situation periodically.
Are you on track toward achieving your goals? If not, what moves can you make to get back on the right path? You need to be honest with yourself to see if you’re doing all you can to help make progress toward your objectives.
“De-clutter” your portfolio
As you go about sprucing up your house, you may find that you have a lot of clutter. Do you really need three mops? And are you holding on to those old calendars for any good reason? You’ll probably feel much better about your surroundings when you de-clutter them – and the same may be true of your investment portfolio.
For example, do you own several investments that are virtually identical? If so, you might want to consider ways to help diversify your holdings. While diversification can’t guarantee profits or protect against losses in a declining market, it might help reduce the impact of market volatility on your portfolio.
Recharge your batteries
When you do your household spring cleaning, you may want to check the batteries on your smoke alarm, carbon monoxide detector and other devices. And as part of your financial spring cleaning, you might need to recharge your own investment “batteries,” so to speak. In other words, increase the power you’re providing to your portfolio. You can do this in a few different ways.
First, you can increase your contributions to your 401(k) or similar retirement plan every time your salary goes up. You can also try to “max out” on your IRA contributions each year. (For 2020, you can put in up to $6,000 in an IRA, or $7,000 if you’re age 50 or older). Another way to increase your investment voltage is to make sure you’ve got adequate growth potential in your portfolio based on your goals and risk tolerance.
Put your house in order
As part of your spring cleanup, you may want to check for damage on your roof, windows, siding and so on. But you also need to put your financial house in order, especially as it regards to protection. Do you have adequate life insurance? If not, your family could suffer if something were to happen to you. And have you thought about how you could pay for long-term care if you needed it?
The average annual cost for a private room in a nursing home is about $100,000, according to the insurance company Genworth. To retain your financial independence – and also to help protect your grown children from possibly having to deal with these costs – you may want to explore some type of long-term care insurance.
By doing some spring cleaning around your home, you’ll lighten up your living space. And doing some financial spring cleaning may help you brighten your future.