Spring cleaning your finances
5 Tips: We'll get you started on streamlining your financial affairs.
NEW YORK (CNNMoney.com) - Spring is a great time to clean out the cobwebs in your home. And it's an even better time to clean up your financial affairs.
In today's top 5 tips we're going to give you the ultimate guide to spring cleaning your finances.
1. Let go of the paperwork
Don't be a packrat. We all tend to hold onto those year-old credit card statements and bank statements. But now is a great time to give the heave-ho to many of those documents.
To prevent identity theft, first get yourself a crosscut shredder that will tear your documents into confetti rather than strips. They cost about $50 dollars at office supply stores.
Get rid of credit-card statements, canceled checks, and check statements after a year. You can toss pay stubs, 401(k) statements and Social Security statements when you get new ones. Toss your CDs and Savings Bond after maturity. Get rid of your car title when you sell your vehicle and throw out warranties when they expire.
Hold onto your tax returns and documents for at least seven years. And of course there are some things that you should never part with. Personal documents, like birth certificates, marriage licenses and your social security card should be kept in a safe deposit box.
2. Consolidate your IRAs
Most households have four to five IRAs, says Ed Slott, an accountant who specializes in IRAs. That's a whole lotta paperwork you don't need. If you have four IRAs, that's four separate statements and quarterly reports.
So instead of having a few different accounts, put them in one diversified fund. This way you'll also have more leverage in negotiating fees with the broker.
With IRAs you have to start taking your money out by the time you're 70 and a half years old. If you don't, as a penalty you'll be forced to give half of that disbursement to the government. That's because Uncle Sam can't wait to collect taxes from the $3.5 trillion in IRA accounts out there.
3. Streamline your savings
If you have a few different savings accounts and some scattered CDs, consider moving these accounts to one bank. You may be able to qualify for discounts on loan rates or avoid fees some banks charge if minimums aren't met.
And you don't have to stick with your tried and true bank. It's all about the interest. Think about going out of state to stash your cash in savings accounts and CDs. Many times, those rates are much higher than what you'll find locally, says McBride.
It's also a great time to put some cash into a CD if you can swing it. Right now you can get yields over 5 percent if you shop around. The rate at your local bank is likely closer to 3.4 percent right now, says McBride.
If the thought of sending all your cash to a different part of the country has you on edge, remember that you'll still be covered by FDIC insurance up to $100,000 if you use a legitimate bank. To compare rates go to Bankrate.com or check out Yahoo! Finance.
4. Whittle down the plastic
The average person has six credit cards in their wallet, not including debit cards, according to CardWeb. But to really do some spring cleaning, pare down that plastic! Too many credit cards increase the risk of overspending and missing payments. And then you'll be hit with late fees and penalty rates.
You really need only about two credit cards, according to the experts.
"If you have more than two cards and you have an outstanding balance, you shouldn't be out getting another card. You really need focus on tackling debt," says Bankrate.com's senior analyst Greg McBride.
Don't get lured in by reward cards. You have to think about the ratio of reward to spending. If you do decide to get rid of some cards, make sure you don't close down the credit cards that are older than 5 years old.
"You'll be hurting your credit history," says McBride.
5. Close the gaps
Take a look now into those areas of your financial life that you may not have paid attention to before. If you've had a major life change, like your kids moved out of the house, you went through a divorce or had a new baby or a death in the family, you'll want to make sure you've updated your insurance.
Take the time now to check the beneficiary forms in your IRA to make sure they're updated. Don't assume that your bank or broker will have your paperwork. According to Slott, banks and brokerage houses change staff and merge very frequently, so you're never guaranteed that your paperwork is there.
And finally, think about creating a living will. This document will give you control over your future health care decisions and spells out how your assets will be distributed and how your dependents will be cared for after you die. For more information, check out the AARP's Web site or the federal Citizen Information Center.
Gerri Willis is a personal finance editor for CNN Business News and the host for Open House. Send your questions, your comments and your own ideas to us at firstname.lastname@example.org.