The advent of spring is the perfect time to clean up your finances. Almost nine out of 10 people set a money goal for 2019, according to a 2018 survey by Bankrate. The top priorities were paying down debt, followed by better budgeting.
“If you did get a big refund, try not to go out and spend it. Have a nice dinner, but then pay down the outstanding debt,” CBS News business analyst Jill Schlesinger said in our Eye on Money series.
She said cover the big three: debt, emergency reserve fund, and IRA or Roth IRA contribution.
“Any of those things can really help jump start your finances for 2019,” Schlesinger said.
If you got a big tax refund this year, however, you may want to change your withholdings “to help your cash flow throughout the year,” she said.
“When you got that big refund, that meant the IRS kept your money throughout the year. That might mean that you were a bit tighter during the year than you needed to. So I highly suggest that people go to the IRS.gov withholding calculator. Then you see what’s the proper amount,” Schlesinger said. “You kind of want to end up neutral, not owing, but not getting a big refund.”
If you’re self-employed, Schlesinger advised adjusting the amount you’re sending the IRS on a quarterly basis.
In the same vein as tidying queen Marie Kondo, Schlesinger said let your financial life spark joy, not oy. That could start with consolidating old investment or bank accounts.
“What happens is a lot of people are switching jobs and that means you’re leaving little orphan accounts throughout your life. So we want to consolidate this. Not only does consolidation help you better manage your portfolio, you can basically take an old retirement plan and go to your current retirement plan,” she said.
By consolidating bank accounts, Schlesinger said you might get better deals and pay fewer fees.
It also helps to tidy up your financial life if you know what documents you need to keep.
“Fire up your shredder because we want you to get rid of old stuff. Here’s the problem – for the IRS, they usually audit within, say, three years. But they have up to six years if you have a big error. So keep the tax documents for six years, hopefully you have them electronically,” Schlesinger said.
Keep investment documents for a year, while credit card and utility bills for not more than 45 days (unless you need them for tax purposes).
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