5 Tips to Spring Clean Your Finances
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Tips to spring clean your finances
Hello, money makers! Spring brings a sense of renewal, and what better way to embrace this season than by giving your finances a good, thorough cleaning? Just like decluttering your home can bring a sense of order and clarity, tidying up your financial life can greatly improve your financial health. Let’s embark on a journey to rejuvenate your finances this spring.
1. Organize your finances
The first step in your financial spring cleaning is organizing your finances, just like how you might spring clean your closet. If you don’t already use a personal finance app like Rocket Money or Monarch, start by gathering all your financial documents – this includes bank statements, bills, insurance policies, and tax returns. Sort through them carefully, determining what needs to be kept and what can be discarded. You might even consider uploading them to your computer or laptop for easy safekeeping. Particularly regarding insurance policies, consider reaching out to your insurance providers to see if you may be able to reduce any of your premiums to save a few bucks along the way.
2. Refresh your spending plan
A change in season is a perfect time to revisit and refresh your budget or spending plan — simply put, whatever system you use to allocate your income. Don’t have one? Check out my Quick Budget Course here.
Start by reviewing your current expenses and income. Have there been any significant changes? Perhaps a pay raise, a new monthly subscription, or increased utility bills due to seasonal changes. Adjust your budget to reflect these changes. Also, make sure to keep in mind any increased 401k or IRA contribution limits you may want to take advantage of.
Remember: utilizing tax-advantaged accounts like your 401k or IRA means more savings for you to build wealth faster!
Next, take a look at your spending habits. Are there areas where you want to reallocate your spending or cut back? For example, maybe you want to spend a little less on clothes and put a little more away towards a future vacation! Or, maybe you've noticed an uptick in takeout expenses or an unused gym membership. By reallocating these funds towards your savings or debt repayment, you can significantly improve your financial position. After all, a budget is not set in stone; it should be a flexible tool that adapts to your changing financial situation and goals over time.
3. Check (and boost) your credit score
Your credit score is a crucial component of your financial profile. It's recommended to check your credit report annually, which is different from your credit score alone. Your credit report not only helps you understand where you stand credit-wise but also allows you to spot any inaccuracies or signs of identity theft. You can obtain a free credit report annually from each of the three major credit bureaus or by visiting www.annualcreditreport.com.
If your credit score isn't where you'd like it to be, consider ways to improve it. For an easy win, request a credit limit increase which can automatically reduce your credit utilization, a credit factor that measures how much of your total available credit limit you actually use. Ideally, you want to keep this low to help improve your score, so requesting a credit limit increase helps improve that ratio. That said, this only works if you don’t continue to increase your balance on the card. This will involve a hard credit check, so not something you want to do very often, but if you’ve had your credit card and have been making on-time payments, may be worth a shot!
Other things that help improve your credit include timely payment of bills, keeping credit card balances low, and being cautious about opening new credit accounts are effective strategies. Small steps like setting up payment reminders or automatic payments can have a significant impact on your credit score over time.
4. Reduce unnecessary expenses
Reducing any unnecessary expenses can help you reach your other goals quicker, like paying off debt or increasing your investment contributions to build wealth faster over time. Take a close look at your recurring expenses. Subscriptions and memberships that you no longer use or need can be a drain on your resources. It’s surprising how these small expenses can add up over time. The app Rocket Money can also help you identify and cancel subscriptions automatically.
Once you identify these financial weeds, it’s time to take action. Cancel any unused subscriptions and memberships. Then, strategically redirect the money you've freed up. You could increase your savings contributions, pay down debt, or even invest in a small personal treat that brings you joy. The key is to ensure that your money is being spent in a way that aligns with your financial goals and values.
5. Prepare to grow
The final step in your financial spring cleaning is about looking forward and preparing for future growth. Begin by reflecting on what you want to achieve financially. In evaluating your current circumstances, take the time to revise any financial goals and set timelines and monthly contributions aside to progress toward them. It could be saving for something significant, like a vacation or a down payment on a house, or perhaps paying off a specific debt. The clarity of having these goals written down cannot be overstated; it transforms them from mere thoughts into tangible targets.
Once you have your goals outlined, the next step is to create actionable strategies to achieve them. This is where the real growth happens. If your goal is to save a certain amount, break it down into manageable monthly or even weekly savings targets. For example, saving $1,000 over the next six months translates to roughly $167 per month. To make this more achievable, consider setting up automatic transfers to a high-yield savings account, thereby making the process consistent and effortless. Automating your finances can also be helpful in reducing financial stress by eliminating the need for mental space you’d otherwise use to make that transfer manually every month.
The key takeaway
Spring cleaning your finances can set you up for a more organized and prosperous year. By decluttering, reevaluating, and planning, you take crucial steps toward financial well-being. Remember, every small step counts in your financial journey. Happy spring cleaning, money makers!
