BP Holdings: 10 financial tips to cut clutter, bolster protection

This is a good time for a financial spring cleaning.

Most people have filed their income-tax returns, so a lot of financial information is fresh and accessible. It's time to determine which records to keep and which to toss. But taxes aren't the only aspect. Here are 10 general tips for de-cluttering, organizing and protecting:

1. Decide on income-tax records.

When it comes to tax returns, receipts and supporting statements, the general rule is to retain documents for at least three years. The IRS can go back that far on routine audits. But if the IRS suspects you under-reported a sizable chunk of income, it can go back six years. And if fraud is suspected, there's no time limit.

Documents that establish your cost basis in investments should be kept until after you sell. These include papers showing the purchase price or cost of improvements on a home, reinvested dividends in taxable mutual funds and records showing how much you contributed to non-deductible IRAs.

2. Automate what you can.

A big part of cutting down on paper clutter involves doing more business through your home computer or smartphone. This includes setting up automatic bill paying and auto deposits. One benefit of investing in 401(k) plans is that the money automatically comes out of each paycheck and gets transferred into investment accounts, with no need to think about each transaction. You can do the same with non-retirement accounts.

3. Be sensitive to fees.

Survey your financial accounts for the types and levels of fees, from your credit-card interest rate to 401(k) expenses. Make sure they're reasonable. Banks and other financial entities levy fees for bounced checks, out-of-network ATM charges, late payments and more. Most of these charges are avoidable. Many companies allow you to set up alerts so that you don't miss a payment deadline, exceed your balance or otherwise trigger a charge.

Though bank fees can be irritating, investment costs can add up to more money over time. Workplace 401(k) balances can run into the tens of thousands of dollars, so paying even an extra half-percentage point can add up. At a minimum, avoid stock funds charging more than 1 percent annually or bond funds with expenses above 0.5 percent.

4. Take an inventory of belongings.

It's not likely you will be burglarized or suffer fire damage, but if those did occur, you would be thankful to have a list or visual evidence of all the personal items destroyed or taken. That's why it makes sense to take an inventory of belongings. Documentation also will help substantiate insurance claims.

Your inventory can be as simple as walking around the house with a video recorder or camera. If you're more ambitious, jot down model numbers of big-ticket items or compile receipts.

5. Devise an emergency plan.

If you had to evacuate your home, it would be handy to grab a file of essential information, either in paper form or on a flash drive. Your evacuation plan should include details on financial and other accounts, insurer-contact information, a list of bills that need paying, medications and perhaps even veterinarian contacts. It might take some time to distill all the information in your life down to what's really essential, but that's part of the exercise.

6. Close unneeded accounts.

It's possible you rarely use certain credit cards, have low balances in some bank accounts or have two or more mutual funds that hold similar investments. If so, consider removing some of this clutter by closing accounts. You might be able to save money, such as the annual credit-card fees. You also will have less to keep track of.

Some people hang on to old credit cards because they worry about harming their credit scores. Your score could indeed dip if you close a seasoned account, but the impact probably would be minor — certainly less than not paying bills on time.

7. Review your estate plan.

Periodically verify that you have listed the right people to take over your wealth should the time come. Make sure the names are still appropriate, given that some friends or relatives might have died or relationships might have changed. This beneficiary checklist should include retirement and insurance accounts, wills and trusts.

If you have financial or health-care powers of attorney, it's smart to update them if they're more than a year or two old. Financial companies or other parties aren't required to honor these documents if they deem them to be out of date or otherwise deficient.

8. Bolster credit protections.

Check your credit reports every now and then. Given security breaches such as the ones reported by Target and Maricopa Community Colleges, this exercise has become more critical. Monitor bank and credit-card statements for even small transactions, set up account alerts that notify you of transactions and shred unneeded documents containing sensitive information. Order one free report each year from each of the three credit bureaus — Equifax, Experian and TransUnion — at annualcreditreport.com.

9. Keep cyber defenses high.

Install antivirus and malware protection on your computer, stick with secure sites as much as possible and don't click on unfamiliar e-mail attachments. As a kid, you learned not to talk to strangers; now you should avoid answering their e-mail invitations. You also should routinely change passwords and use strong ones — those that include a mix of numbers, letters and special characters.

10. Alter tactics after Heartbleed.

Matters have become more complicated in the wake of the Heartbleed security flaw, which involves possible breaches at websites thought to be secure. Before changing passwords, create an inventory of every website you utilize. Then, without logging on, search each site for a notice indicating that the company has installed the necessary patch or fix. You also can check this by typing Web addresses into www.ssllabs.com/ssltest, which tracks patches as they're made.

"If the Web vendor has validated that it has patched the security hole, change your password," advises accounting-firm CliftonLarsonAllen. But don't do so until the patch is in place. Otherwise, you will need to repeat the exercise and change your passwords again, after fixes have been made.