By FPA member Richard Gotterer, CFP®
Last Updated: March 5, 2012
As we say goodbye to Old Man Winter, thoughts of spring cleaning jump into our heads. Here are a few things to put on this year’s to-do list.
Clean-up your files. All year, you filed monthly bills, bank/brokerage statements and paystubs until tax time. Now that your taxes are filed, it’s time to take a look at what you need to keep and for how long.
According to IRS Publication 552, “you need to keep your records for as long as they may be needed for the administration of any provision of the Internal Revenue Code.” For practical purposes, this means you need to keep anything that supports the income, expenses and deductions on your tax return for the last six years. This includes: W-2s, 1099s, cancelled checks, and receipts for charitable contributions and deductible expenses.
On a longer-term basis, you should keep: any document relating to the purchase or sale of a home; receipts for capital improvements to real estate that increase your cost basis; and loan repayment documents and annual brokerage and retirement plan statements. Store this information in a fire proof/water proof file cabinet. You can shred your regular monthly household bills once you receive the next month’s bill showing the previous month’s payment and zero balance. When disposing of financial documents, don’t fall victim to identity theft — shred everything that you discard.
Polish your policies. Planting of spring flowers is a good reminder that it’s time to review your homeowners insurance policy. Check on and know your deductible. Take an inventory of everything in your home and add up what it would cost to replace these items. Make sure that your policy has a replacement cost or replacement cost plus component and that you are sufficiently covered in case of loss. If you put on or are planning a major addition to your home, update your coverage. Don’t skimp on insurance because the value of your home has declined. The cost to rebuild probably hasn’t declined as much as the market value. A home is typically the largest asset for most families. Make sure you have the proceeds to rebuild should damage occur.
Scrub your documents. Springtime is a good time to review your will and estate planning documents and retirement plan beneficiary designations. Did you have a change in your family, get married, divorced, have a baby or change jobs? Don’t wait, update your plan documents today.
Organize your financial records. The devastation from natural disasters such as floods, hurricanes and tornados are becoming a regular staple in the news. Be sure that you have a financial security kit, in case you have to leave your home in an emergency. The kit should include:
- Contact information and account numbers for your important financial relationships, including insurance companies, banks, brokerage and investment firms, credit card companies and mortgage servicers.
- Copies of important “life event” documents, such as birth certificates, marriage licenses, passports, house title/deed and estate planning documents.
- An electronic back-up of your computer and other important financial information.
Spring cleaning provides personal satisfaction. With the longer days and the warmth of bright sunshine come a sense of renewed strength and a time to reinvigorate those New Year’s resolutions. Promise, purpose and progress!
FPA member Richard Gotterer, CFP®, is Managing Director Florida of Wescott Financial Advisory Group LLC, headquartered in Philadelphia with offices in Boca Raton, Coral Gables, Miami and San Francisco.