Spring is the time of year we associate with cleaning. We organize our possessions, we scrub surfaces and clean every nook and cranny, and we may even get rid of things we’ve kept for far too long.
Usually, when we think of these practices, we apply them to our homes and our things. But don’t stop the idea of spring cleaning there.
These Tips Can Help You Tidy Up Your Finances This Spring
This is a great time to do a little spring cleaning with your finances. Here are five ways to get your money straight this spring.
Evaluate Your Current Financial Situation
You can’t take action or work to “clean up” your financial situation if you’re unsure of what it actually looks like — from the big picture down to the details.
Start with the basics: ensure you’re operating with a budget, you have a system to track your finances and you’re living within your means.
Take a look at each of these elements in detail. Is your budgeting process one that you like and consistently stick with month after month? If it’s not working for you, it’s time to try something new. Remember, there’s no such thing as one right way to budget your money.
The perfect budgeting system is one that you can stick with and makes sense to you. That said, here’s one we recommend: The CLARK Method To Create a Monthly Budget.
After you’ve got your monthly budget in line, also take a look at how you manage your money on a daily basis. If things are slipping through the cracks, take time to clean the cobwebs from your financial processes and create systems that actually function for you.
Once you cover the details, check out the big picture. Look at your net worth — your assets minus your liabilities — to get a feel for your overall financial health.
Cut Unnecessary Costs
Lifestyle inflation is a hard thing to avoid, and it’s a trap many of us fall into at one point or another. This spring, take a look at your spending and your expenses. Have any “wants” crept into the “needs” category?
If so, clean ’em out and put them back where they belong. Understand the difference between luxuries and what you truly need to live a comfortable, happy life within your means.
Also take a look at the expenses that you can’t avoid: housing, food transportation. What costs rose over the last year? Call service providers and any company that regularly sends you a bill to ensure you’re not paying for more than you need. You can do some spring cleaning just by trimming those expenses you can’t throw out completely.
Check on Investments, Insurances and Other Issues
Most of us take a set-it-and-forget it approach with boring things like insurance policies. Who wants to pour over those more than they need to? The same can be said for company benefits or your investment accounts.
But as life changes, so do your financial needs. You want to be aware of what your insurance covers, for example, before you need to file a claim. If you experienced any major life changes in the last year, your insurance may simply be outdated. Update policies as necessary and make sure beneficiaries are listed correctly.
You can also check on your credit reports. Even if you think you have great credit or aren’t worried about credit at all, it’s important to look at your reports on an annual basis so you can make sure everything is correct. If there’s a mistake, you’ll need to talk with one of the three credit bureaus (TransUnion, Experian, Equifax) to resolve the error.
At work, review your company benefits and retirement plan. You want to use all the benefits you’re entitled to. When looking at your retirement plan, take a look at how much you’re paying in fees.
And if you don’t understand something, ask your company’s benefits or HR representative. No one cares more about your money than you do, so speak up when you’re confused or uncertain of how something works.
Finally, check to see how much you contribute to any kind of retirement account. (If you’re self-employed, this applies to you too. You can invest in SEP IRAs, Solo 401(k)s, traditional IRAs, and more.) You want to increase your contribution every year — especially if you’ve earned a raise or make more this year than you did last year.
Organize Your Financial Life
Do you know the status (open or closed) of every single credit card you’ve ever had? Do you know where you’ve stashed your tax returns from the last seven years? Can you access a credit card statement quickly so you can dispute an incorrect charge in a timely manner?
You can’t manage information you don’t have or know. And you certainly can’t keep track of every aspect of your financial life if you don’t have a clue about parts of it. This sounds simple, but a little organization goes a long way.
Take the time to set up some sort of organizational system. It can be a filing cabinet, it can be a digital folder on your computer (or in the cloud), or it can be as simple as a shoebox — just as long as it’s easy to find what you’re looking for. Much like a budget, what’s important here is not how you do it but that you do it at all.
Reconnect With Your Financial Goals and Priorities
Much like costs and expenses that sneak up on you, your financial goals and priorities can shift around without you realizing it. It’s always good to take a step back and check in with yourself. Are you still on the right track toward what you want to achieve?
If you’ve missed a few goals or have gone way off the path, that’s OK. Look at the goals you’re setting and first make sure they’re “SMART”: specific, measurable, actionable, realistic, and timely (which means they have a deadline attached to them). When your goals don’t meet these criteria, you could set yourself up for a rough time in reaching them.
Make it a habit to check in with yourself and what you want so you can ensure your actions take you closer to goals and dreams instead of further away from them.
It feels great to spring clean your home and enjoy the start to a fresh new season. The same can be said when you spring clean your finances. You can replace outdated money management systems and habits, get organized, and rediscover your financial priorities to make the next 12 months even better than the last.