“If you expect your income to be pretty similar to last year, you can do the math to [determine your withholdings,” Wright says. “If you ended up owing $6,000 [last year], then maybe each month you need to make sure an extra $500 is withheld,” Meanwhile, if you expect your income to change, you can also adjust accordingly.
FAQ
How often should I perform a financial spring cleaning?
An overall financial spring cleaning can be done once per year, according to Grundza.
“I think once a year is a great practice,” Grundza says. “I have seen folks do it more than that if they are approaching retirement or they have experienced [or anticipate] a big life change. There is nothing wrong with [reviewing your finances] more than once a year, but I think once a year is a really healthy number where you’re not hyper-obsessing over it.”
However, there are individual aspects of your personal finances you’ll want to check in with more frequently, such as reviewing your monthly spending to make sure you’re sticking to your budget.
What’s the best way to track financial progress year to year?
Methods to track your financial progress year to year include spreadsheets and personal budgeting apps. Depending on your financial goals, you might track your net worth, total debt amount, annual income, investment growth and savings rate, among other items.
Should I involve a financial advisor in my review?
There are certain aspects of your personal finances where it might be helpful to have a financial advisor help you review, such as your investment accounts and long-term financial goals. If you have a relationship with an advisor, consider including them in your larger annual financial reviews, then handling the more frequent check-ins yourself.
How do I spot outdated or inefficient accounts?
Start by looking for those accounts that you no longer use. Let’s say you have a traditional savings account, but have replaced it with a high-yield savings account that earns more. You could close the traditional savings account to simplify your finances.
Next, look for accounts that are no longer serving your finances that you can either replace or eliminate, such as bank accounts with fees, credit cards without perks, savings accounts with low APYs or unused subscriptions.
What tools help organize financial documents and goals?
There are plenty of budgeting apps that can help you track your monthly budget and spending, your net worth, your debt payoff and your other financial goals. Important financial documents can be stored either digitally in secure online storage or physically in a fireproof box or filing cabinet in your home.