Updated: Jun 3, 2020
In case you missed it, I’m sharing my 9 financial spring cleaning tips in blog form for those who may not be following along on social. Happy cleaning!
Tip #1: Start with a R.E.A.L.I.S.T.I.C budget.
Your budget – or spending plan or whatever you choose to call it – is the most important piece of your financial blueprint. That said, starting with a R.E.A.L.I.S.T.I.C budget will help you plan for nearly anything. All it takes is a few hours of devoted time to go over your spending during the past three months. You’re worth the investment of one afternoon or evening to set yourself up for success.
Do you notice any problem spending areas (i.e., eating out excessively, daily happy hours, etc.)? Or are there any areas where you’re budgeting more than you need to? If so, adjust your budget accordingly.
While you’re at it, see how well you’ve been sticking to your budget. If you find yourself constantly tweaking your budget throughout the month, you’re probably spending too much time on it! Work to simplify your budget by creating fewer, broader expense categories. You’ll keep your spending in check, but your budget will take up less head space.
Tip #2: Request a free credit report.
It’s now April and you swore this was the year you’d get it together. First quarter is over and it’s time to get in the game. You can request a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion).
Check out annualcreditreport.com. Once you have your credit report, you can check for and correct any errors. This is especially important if you’re thinking of making any major purchases, like buying a new car or home.
Tip #3: Consolidate your accounts.
Keeping track of one account is hard work, let alone 2, 3 or 4. Now is a great time to consolidate accounts by closing out unused accounts and tossing dusty, old checks and statements that are lying around.
PRO-TIP: Instead of having 3-4 accounts set aside for various types of withdrawals, consider contacting your bank and establishing earmarks within 1 account. For example, if you are saving for long-term spending (i.e., vacations, emergency funds, etc.), you can create an earmarked account with the name “Long-term Saving for Spending.” Creating earmarks or line items within your account creates additional clarity in terms of how you intend for your resources to be used.
Tip #4: Toss or shred those stacks/boxes of paper.
Yup, I’m referring to those that you hide when company comes over. This step is great for spring cleaning both your home and your finances. And fortunately, due to COVID-19, we all have more time on our hands for projects such as these.
Take time to sort through your paperwork and files, and shred the documents you no longer need and/or that contain personal information.
The federal government recommends that you only need to keep bank statements for a year, and you can discard tax documents (and their supporting records) after seven years.
Most accounts these days have a paperless billing option. Not receiving all those paper bills in the mail (especially if you log online to pay bills, anyway) can cut back on those piles of paper taking over the kitchen counter. Take time this spring to opt for paperless billing wherever possible. Your clutter piles – and the environment – will thank you.
Tip #5: Check your withholding.
Tax return checks seem wonderful on the surface however, if you receive big returns, it actually means you gave Uncle Sam an interest-free loan out of your paychecks throughout the year.
When setting up your withholding, your goal should be to achieve a balance. Work to get as much as possible in your paychecks without owing IRS when you file taxes. Work with your CPA or tax preparer to determine what’s best for you and your family and make the adjustment. More money in your paycheck each month means more to contribute to your emergency savings or to invest.
Tip #6: Address debt...it doesn’t just go away.
I know it can be overwhelming to think about debt however, turning a blind eye doesn’t make it go away. In fact, it can make things worse and lead to even more stress down the line.
If you’re confused about where to start, a careful review of your debts is a good starting point. From there, you will have a clearer understanding of what you owe and can build out a strategy for repayment. My FREE R.E.A.L.I.S.T.I.C Budget Method Companion tool offers a tab for keeping track of all debts, outstanding balances, interest rates, due dates, minimum payments, etc. Download a copy today by visiting www.savingsolutions.biz and signing up for my blog and email list.
After you have a grasp of what you owe and can comfortably afford to pay based on your budget, don’t hesitate to contact your lender to see if alternative payment options are available. You may be able to change your due date so that a payment is due closer to when you receive your income. Or, you could explore extended repayment options depending on your financial situation.
Tip #7: Shop around for better rates.
If it’s been a while since you’ve shopped around for better rates on your car insurance, cell phone plan, cable or other recurring expenses, now is a good time. You should be shopping for better rates at least once a year – preferably twice – to ensure you’re not overpaying for services.
Tip #8: Check up on insurance coverage.
When was the last time you reviewed your homeowners or life insurance policies? It may be time to give your insurance a check-up. Pull copies of your policy documents to ensure you have adequate coverage. You may, for instance, need to upgrade your life insurance if you’ve recently had a child or received a significant raise (since life insurance coverage is normally based on your salary). As housing construction costs rise, you may also need to upgrade your homeowner’s insurance policy to ensure you could rebuild in case of a total loss.
Tip #9: Start and/or increase your emergency savings...it’s not a matter of if an emergency will happen but when.
Even if you are starting small, every bit counts. Work to set aside $100 each month for emergencies. In one year, that will be $1200. As your income grows or as you reign in your spending, be a bit more aggressive with your emergency savings. While financial experts can’t seem to agree on how many months of savings is appropriate (3, 6, 8 or 12), the general rule of thumb is 3-6. I’m more conservative, so 8-12 months is more my speed.
For those looking to up the ante, you will
want to check out a few financial considerations shared in light of COVID-19.