When it comes to spring cleaning, most of us think about that garage clutter or the garden’s overrun corner. And while traditional ‘spring cleaning’ activities such as these are essential, we shouldn’t forget about the part of our lives that can always do with some extra attention: our finances.
So often, this is quite daunting for many people who need help knowing where to begin. To simplify this process, we’ve put together the ten most important ways to spring clean your finances. Let’s take a closer look.
1. Monitor Your Spending
Getting a fundamental understanding of where you stand requires a close look at your income and expenses. Begin by looking through your bank statements and keeping track of everything you bought that you wanted but couldn’t afford.
To reduce expenses, consider minimizing or eliminating unnecessary spending. This includes items like memberships you don’t utilize, coffee on the run, and takeaway meals. Practice moderation in discretionary spending. After eliminating unnecessary expenditures, try to stay within your budget.
2. Consolidate Your Finances
Spring cleaning has the benefit of making you feel organized. The advantage of consolidating your finances is that you can track and manage them more efficiently.
You may have left your old job with an untouched 401(k). IRAs can be rolled over into other retirement accounts. Monthly statements are fewer when there are fewer investment accounts.
Additionally, you will need to gather fewer tax documents each year, and your account passwords and IDs will be easier to remember.
3. Revise Your Budget
A budget is one of the most important financial tools you can have. An online budget tool can assist you in categorizing and budgeting your finances if you have never created one. With a spreadsheet and some filters, you can also do it yourself.
The most crucial aspect of revising your budget is honesty! Be honest about what you spend and what your capabilities are. When creating your budget, ask yourself these questions:
- How much do you spend each month?
- Do you have a realistic budget?
- What is the balance between wants and needs in your budget?
- Have you put money aside for emergencies?
- Is there a category in which you overspend?
- Have you left room for fun?
4. Change Your Bank Account
Consider changing current account providers if you haven’t done so for years. A more competitive bank offers more services, which may suit your needs better — like offering an improved interest rate or better services, for example.
Switching to a new bank can also come with financial incentives. Still, your reason for changing may not be because you are offered free money but because the bank you are switching to works for you.
5. Review Your Credit Report
Verify the accuracy of your credit report. The three credit bureaus — TransUnion, Experian, and Equifax — compile your credit report containing all your loan and payment information. To maintain a good credit score, you should ensure that the information contained in your credit report is accurate.
To make sure no errors are dragging down your credit score, review it at least annually. Each credit bureau must provide you with a free credit report once a year.
6. Set Up a Savings Plan
Saving money each month can be challenging, especially in rough economic conditions. Keeping a reasonable budget, however, will allow you to save some cash regularly.
Identify areas where you can cut costs by reviewing your income and expenses. For example, consider switching to a cheaper supermarket or purchasing off-brand products if you need to spend less on groceries. Determine how much you can save each month to set yourself up for success.
If you want to save money, put it into savings as soon as you get paid each month, not when you’re close to running out of money. Remember to pay yourself first!
7. Get the Most Out of Your Credit Cards
Take steps to maximize your credit card usage while reviewing your savings and spending habits. For example, earning points toward flights and hotel stays can be a significant perk of charging your purchases to a rewards credit card.
By spending strategically, you can get the most out of your rewards credit cards, such as using cards for groceries, travel, and gas.
Additionally, you can earn cash back and airline miles with your credit card rewards. If you are planning to make a large purchase, such as a home renovation, apply for a reward card before making it to be eligible for the introductory bonus.
Ensure you only use rewards credit cards if you can afford to pay them off each month to prevent carrying a balance on your card. Paying interest on high balances could wipe out all your gains.
8. Establish New Financial Goals
You can make medium- and long-term financial goals once you have your day-to-day finances under control. But first, consider where you would like to be five, ten, or 40 years from now on your own or with your partner, spouse, or loved one.
Do you have a realistic plan for when and how you want to retire? For example, would you like to vacation, buy a new house, or save money for a family? These are excellent points to consider if you want to set some financial goals.
9. Invest More in Retirement
Even modest increases in retirement contributions can result in a sizable increase in nest eggs. Crunch the numbers yourself or contact a financial planner to see the benefits.
Consider increasing your contributions to your workplace 401(k) or IRA. Conversely, you can reduce your contributions if you find it difficult to live without that income.
When your employer offers a 401(k) match, take full advantage of it. You can open an IRA on your own if your employer does not provide a plan.
10. Review Your Insurance Coverage
Most people should review their insurance policies to ensure coverage is appropriate for their current circumstances.
Reviewing your insurance policies in the spring is a great idea. Start by rereading the terms and updating your policy and beneficiaries to meet your current needs.
You should also shop around and find better-priced coverage. Most insurance companies will bring their premiums down to keep you on board, so checking out the competition is a win-win move on your part.
The great thing about personal finance is that spring cleaning can happen any time of year. A regular review of your finances is beneficial to reaching your budgeting and savings goals, so don’t be afraid to roll up your sleeves and get to work!