5 Ways to Spring Clean Your Finances
Spring can be a great time to clean up your house and your finances. The holiday season and chilly air have faded and just like the lilies popping up, you can get a fresh start.
Below, we share five tips to “spring clean” your finances. Follow these tips and you’ll be in better financial shape for the rest of the year.
5 Ways to Spring Clean Your Finances
1. Review Your Expenses
When was the last time you had a hard look at your expenses?
Taking the time each spring to review your spending can save you money for the rest of the year. This involves going through recurring bills, as well as questioning any unnecessary spending.
Some questions to ask yourself are:
- Do you have too many subscriptions and memberships?
- Can you find cheaper insurance with another company?
- Are you overusing utilities, like water and electricity?
- Can you switch to a cheaper cell phone plan?
- Are you buying items you don’t need?
- Is there a way to buy cheaper groceries?
If you can cut back on everyday costs, the savings can really add up. For example, if you can find a way to save $500 each year, over 10 years you’ll have $5,000 more than if you didn’t. If you invest the savings, you’ll end up with even more.
2. Organize Your Documents
Even in this digital world, we somehow end up with too much paperwork. These stacks of paperwork can quickly turn into mountains that rival Everest.
Spring can be just the time to tackle those mountains and get them back down to molehills.
Staying organized will be easier if you can create a system. A file cabinet or drawer with labeled folders can be a lifesaver.
You can divide the paperwork whichever way works best for you. You could, for example, put all of your utility bills in one folder, papers relating to auto insurance and repairs in another and so on.
You’ll also want to organize your digital documents. Do you have pictures of your cat Fluffy in the same folder as your tax returns? Time to separate the two!
Speaking of tax documents, you can have a blast one Saturday night shredding the ones you no longer need. Generally speaking, you can shred any returns older than three years.
There are exceptions, though, so you’ll want to understand which rules apply to your returns before shredding. Of course, there is always the option to scan and then back up the documents before destroying the paper copies.
In general, you’ll want to shred (or delete) any documents you no longer need. If you don’t have a shredder at home, you can have your documents shredded inexpensively at certain office supply stores.
3. Review Your Investments
Do you have money in stocks, bonds or real estate? If so, how often do you compare them to other investment options?
While you may be tempted to “set it and forget it,” not doing a periodic review of your investments can have a huge impact on your finances in the long run. This is due to compound interest which, in basic terms, is earning growing amounts of returns over time.
When it comes to investing, the smallest changes can really add up over time. Let’s say, for example, that you save up 10K and want to invest it. For example, the difference between an investment that returns 5% a year versus one that earns you 8%, is $5,300 over a 10-year period! Have 50K to invest? The difference would be a whopping $26,500!
That’s why it’s so important to do at least an annual review of your investment choices. If you have a 401(k) through your employer, you should have the option to choose among different mutual funds. If you’re investing outside of an employer, the sky’s the limit!
Which investments you choose can come down to personal goals, risk tolerances, and preferences. If you’re not sure where to start, it might be time to do some research or consult with a financial planner.
4: Automate Your Bills
Paying bills is about as fun as going to the dentist. Setting up your bills for auto-pay (or auto-debit) can soften the blow.
Automating your bills helps you because you don’t have to worry about remembering to pay them. You also don’t have to take the time each month to pay them. This means less stress and more time.
If you’re worried about an overdraft occuring, you can put the upcoming payment dates on your calendar. That way, there are no surprise fees in your bank account.
Just to be sure to review your bills on auto-pay for any unusual amounts, especially your credit card bills. Otherwise, a fee increase, billing error or even fraud could go unnoticed.
5: Review Your Credit Score
Your credit score matters. A high score will open financial doors while a low score can close them.
Knowing your credit score can help you plan for the future. If you have a low score, for example, you can start working on improving it. If you have a high score, then perhaps you want to start saving for that dream home or car.
Your credit score is determined by your credit history, which is summarized in a report. You can get your full credit report once a year for free. This report will also include your score.
You can use sites like Credit Karma or Annual Credit Report to get your credit score at any time, and your annual full credit report. They use the information from all three major credit reporting agencies (Experian, Equifax and TransUnion). You can also contact each of these agencies directly.
Watch Your Money Grow
You can actually follow these “spring cleaning” tips during any season. The idea is to take some time each year to organize and reassess.
It will take some upfront work but once it’s completed, you can be proud of all of this “adulting” you’ve accomplished. The steps you take here will not only save you time and stress, but they will help your money grow year-round.