6 ways to renew your finances this spring
May 16, 2013
In nature, springtime is a season of renewal. So why not take a cue from nature and use spring as a time to give your financial program a little renewal?
You should take a fresh look at your finances at least once a year, and spring is a good time for it. You should have your holiday bills and your taxes paid by now, and with any luck you may even have received a wage bump with the new year. Now here are six things you should do to make sure your money matters are up to date:
1. Update your stock portfolio
All investors would love to buy low and sell high, but sometimes it just doesn't work out that way. In addition to selling your winners when the price has gone up enough, you should also periodically cull the weaker stocks from your portfolio. This does not mean dumping stocks simply because they have underperformed; in fact, if you still believe in the company and the price is down, you might think about increasing your investment. However, if the company's ability to deliver the business results you expected has been compromised, you should be looking to replace the stock with a more promising opportunity.
2. Restructure your bank deposits
There are times when it makes sense to commit your deposits to long-term CDs in order to earn extra interest, and there are times when you should keep your money flexible in savings or money market accounts. With bank rates generally below 1 percent and five-year CD rates less than 70 basis points above savings account rates, this looks like one of those times when it's best to keep your deposits flexible.
3. Go bank shopping
Once you've decided on how to structure your deposits, it could pay to shop around for the bank offering the best rates in a deposit vehicle that meets your needs. Here's a tip: Online bank rates have been rising while other rates have continued to fall, so consider looking at online banks to improve your interest rates.
4. Boost your retirement savings
You're another year older, and with any luck that means you're earning a little more money. In any case, it means you are another year closer to retirement. Acknowledge this by making the commitment to increasing your automatic payroll deductions into your employer's retirement plan.
5. Evaluate your investment program
Two key questions: Has your portfolio performed competitively over the current market cycle, and is the investment manager following the style and risk profile you expected? If you sense something is wrong, don't wait for it to become a more expensive problem.
6. Run refinancing calculations
Some people go decades without ever getting a good chance to refinance, but with 30-year mortgage rates dropping by nearly 5 percent since early 2000, homeowners over that period may have gotten two or even three chances to refinance. Just because you may have refinanced once doesn't mean you shouldn't periodically run the numbers to see if you could benefit by refinancing again.
There are no miracle systems for good financial management. It is more a matter of doing several things well than of one big breakthrough idea. The spring renewal tasks listed above can help you employ the kind of attention to detail that financial management needs and deserves.