3 Ways to Spring Clean Your Finances
It's time to take out all your investments and try them on to see if they still fit.


Winter has come to an end, and spring cleaning season is here. Along with updating your wardrobe and cleaning out your garage, it’s also a good time to dust off your financial plan.
Here are my three tips for spring cleaning your finances.
1. Pare down.
Most people are hoarding investments, sticking as much as they can into their accounts without knowing what they’re buying and if it overlaps with what they already have. Just like spring is the time to start getting rid of all that household clutter, you should do the same with your investment strategy.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
First, evaluate what you own, where you hold it, and how you use it. Then, refer to both your short- and long-term financial goals — the allocations and the investments that you hold to accomplish each could look remarkably different. Maybe you’re building your emergency fund and saving up for a home renovation, but also need to consider how you’ll maintain a certain lifestyle in retirement in 30 years. If your investments are not helping you accomplish your goals, it’s time to kick them to the curb.
As an example, I once met with an investor who was proud of the fact that he had close to 45 different mutual funds, until I helped him discover that two-thirds of them were large-company stock funds and a quarter of them were from the same company. He mistakenly thought that having a high volume of investments meant he was practicing diversification, but it’s like he owned a toolbox with 45 screwdrivers and no other tools — not the best strategy.
2. Check the fit.
In the same way that you might go through your warmer-weather wardrobe and try on old clothes each spring, you need to try on your current allocation and make sure it still fits. Begin by reviewing your savings and total financial picture — this might include debt, investments, workplace plan savings, college savings for your kids, your Social Security strategies, health care savings plans and more. Does the long-term plan you built last year still fit?
I’ve met with new investors who have been using the same plan for up to 10 years! Just because it worked in the past doesn’t mean it still will this year. This can never be a set-it-on-the-shelf-and-forget-about-it sort of planning situation.
Determine the least amount of risk you must take on to reach your goals. From there, optimize your investments to achieve them. Oftentimes clients are convinced that they must be an aggressive investor if they want to successfully retire, but it may be possible to be a moderate investor and still have an incredibly high probability of success.
3. Embrace the new.
While everything in nature looks new in the springtime, the same concept should apply to your investing approach. Chances are you can increase your savings rate for 2018. Ideally you should aim to max out your 401(k) savings rate or at least contribute enough to take full advantage of the company match that is offered by your employer. But if that’s not doable, it is often a good rule of thumb to try to save 10% of your gross income.
One of my clients began saving just 4% of her income but promised herself that she’d continue to increase her savings by 1 percentage point each year, and it’s been exciting to see how proud she is when we review her accounts each year and see how much she’s accumulated with this approach. Even if you only save 1% for now and try to bump it up another percentage point each year — just start somewhere. The idea is to save as much as you can, for as long as you can.
These three steps are a great place to start. However, just as there is not a single style or size T-shirt, there is not one magical investment or off-the-shelf plan that makes sense for everyone. Depending on your current lifestyle and ability to save, your investments, trading strategies, tax-optimization strategies and longer-term retirement plans are going to be unique to your personal situation. As your life gets more complex and your financial needs change, you may benefit from professional help from an adviser.
The only way to take control of your own finances is to take action — there’s no one else who can do it for you. Follow these three steps to successfully clean up your financial picture this spring.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the U.S., which it awards to individuals who successfully complete CFP® Board's initial and ongoing certification requirements.
©2018 Financial Engines Inc. Financial Engines is a registered trademark of Financial Engines Inc. All advisory services provided by Financial Engines Advisors L.L.C., a federally registered investment adviser and wholly owned subsidiary of Financial Engines Inc. Results are not guaranteed by Financial Engines or any other party. See https://financialengines.com/patent-information for patent information.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Andy Smith is a CERTIFIED FINANCIAL PLANNER™ professional with Financial Engines and co-Host of Financial Engines' Investing Sense®. He has worked as a financial adviser for over 15 years and has helped thousands of investors navigate a variety of markets to achieve their long-term financial and retirement goals.
-
A Savings Tool to Empower People With Disabilities
An ABLE account can improve quality of life for individuals with a disability — it permits tax-free saving for ongoing expenses without jeopardizing benefits.
By Ella Vincent Published
-
401(k) Spousal Consent: Lawmakers Reintroduce Legislation
The Women's Retirement Protection Act (WRPA) would prevent spouses from raiding their partners' 401(k) accounts.
By Christy Bieber Published
-
Social Security Fairness Act: Five Financial Planning Issues to Revisit
More money as a public-sector retiree is great, but there could be unintended consequences with taxes, Medicare and more if you're not careful.
By Daniel Goodman, CFP®, CLU® Published
-
Social Security Warning: Five Missteps Too Many Women Make
Claiming Social Security is complicated, and for women the stakes are high. What you don't know can cost you, so make sure you do know these five things.
By Daniela Dubach Published
-
To Buck the Third-Generation Curse, Focus on the Family Story
The key is to motivate the next generations to contribute to the family business in a productive way. You can look to Lawrence Welk's family as a prime example.
By John M. Goralka Published
-
How Roth Accounts Can Ease Your Tax Burden in Retirement
Strategic Roth IRA conversions can set you up for tax-free income in retirement and a tax-free inheritance for the people you love.
By Jim Hanna Published
-
Are You a High Earner But Still Broke? Five Fixes for That
If you're a HENRY (a higher earner, not rich yet) but feel like you still live paycheck to paycheck, there are steps you can take to get control of your financial future.
By Mallon FitzPatrick, CFP®, AEP®, CLU® Published
-
Tax Diversification: Smart Ways to Preserve Your Nest Egg
A long and active retirement may be costly — and may even bump you into a higher tax bracket. Paying some taxes on your savings now could be the answer.
By Nicholas Shaheen, CFP®, CIMA® Published
-
How to Thrive in Retirement: Balancing the Tradeoffs
To cultivate a happy retirement, you need to tend to it as carefully as you would a flourishing garden, and that means making the right choices for you.
By David Conti, CPRC Published
-
Kick the IRS to the Curb in Retirement
That 401(k) or traditional IRA you've filled with your hard-earned money could turn into a tax bomb. Before it blows, see if a Roth could help rescue you.
By Scott Mallernee, CRPC® Published