- The Washington Times - Monday, April 10, 2006

With the change of seasons, it might be a good idea to think about spring-cleaning your finances.

Getting your papers in order — and then making plans for handling your debts and boosting your savings — can put your fiscal-fitness program into high gear and relieve a lot of anxiety.

“For many people, the reason they’re keeping their financial life in chaos is that they really don’t want to know how bad their problems are,” said Catherine Williams, a credit expert with Money Management International, a Houston financial counseling and education agency. “It’s pure avoidance, and it can only make things worse.”

Unopened bills can lead to late charges on credit card bills, misplaced receipts can mean missed tax deductions, and lack of attention can result in missed savings opportunities, she points out.

Miss Williams recommends consumers set up four bins — which can be baskets, large envelopes, file folders or shoe boxes — to keep track of their financial papers.

The first should hold documents that need to be kept long-term, such as insurance policies and a home mortgage or apartment lease. The second is for receipts and other papers that have to do with taxes, including receipts for charitable contributions and W-2 wage statements.

The third is what she calls the “60-day basket” for paid utility bills and other statements that can be thrown out when the next one comes in.

The last is the “30-day basket” or “action basket” with all bills that need to be paid or deposits that need to be made.

“If you really want to make it easy on yourself, put a calendar, pens and pencils, stamps and envelopes in that 30-day basket so everything is in one place when you sit down to work,” Miss Williams said.

Once your papers are in order, one of the first tasks many consumers must face is dealing with credit card debt.

“We know we shouldn’t collect credit cards like we do greeting cards, but a lot of us do,” Miss Williams said. She recommends consumers consider cutting back to two — one for regular use and a second for true emergencies because “that’s really all we need.”

For those with more cards and lots of debt, Miss Williams suggests making a list that includes the name of the creditor, the interest rate being charged, the total amount owed and the minimum monthly payment.

“Your commitment must be to not let that balance go up,” she said. “The way you get out of debt is with consistent payments that are higher than the minimums. As you pay one [creditor] off, cross it off the list and take the money you were paying that one and apply it to next one.”

Dougal Williams, a senior portfolio manager with Vista Capital Partners Inc. in Portland, Ore., said April was a natural time to “spring-clean” because “with tax time approaching, people are thinking about their finances.”

He believes consumers should get a handle on where they are by creating a budget.

“Track your spending for a couple of weeks or a month, and then subtract that from how much you’re making,” Miss Williams said. “Hopefully, there’s a difference, and hopefully, it’s not a negative.”

If it is negative, consumers need to figure out ways to hold down spending and get their budget in balance. If it’s positive, they can take a closer look at savings.

“The easiest way to save is automatic deductions through your company’s payroll department, either a 401(k) contribution or other salary deferral,” he said. He calls it a “double whammy” because contributions to retirement accounts are made with pretax money and they grow tax-deferred.

Consumers who don’t have company-sponsored plans should look into setting up traditional individual retirement accounts or Roth IRAs, he said. The maximum contribution this year is $4,000, while those 50 and older can save an additional $1,000 under federal “catch-up” provisions.

Mr. Williams also suggests consumers who have a number of different savings accounts, for example several IRAs created when they changed jobs and rolled over retirement savings, consolidate them.

“It simplifies their financial lives, and it makes it easier to make investment decisions,” he said. “Often, when you consolidate accounts, you have higher balances to work with, so maybe can get access to lower-cost mutual funds or reduced transaction charges.”

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