Spring is right around the corner and if you're like many across the country, you might be planning to do some cleaning and tidying up. Spring cleaning doesn't have to be all about housework or getting your yard in order. For the financially-conscious, it's an opportunity to give your finances a fresh start.
Below we dive into spring cleaning your finances with five effective ways to get a better handle on your financial situation.
Tip 1: Review & Refresh Your Budget
Budgeting your income is a great way to stay on top of your financial goals. Whether you have one or not, now is the time to reassess your spending habits in an effort to become more financially stable.
Take a look at your expenses and see where you can cut back spending. Items, such as subscriptions you no longer use, excessive dining out, and impulse purchases should be among the first on your chopping block.
Consider how you will put this money to good use. For example, you can allocate more to your savings, pay down debt, or make an investment into your retirement.
If you need help with creating a new budget, there are a number of useful apps you can try:
If your financial goals have changed, adjust your budget to fit your current objectives, such as saving for a vacation, home improvement, or an emergency fund.
Tip 2: Declutter Your Financial Accounts
Clutter is bothersome, no matter if it's your home office or your finances. As part of your spring cleaning, take note of all bank accounts, credit cards, and investment accounts to determine which are essential. Consider closing inactive accounts, especially any that have a fee, as this can simplify your financial management.
You should also look for opportunities to consolidate debt. Ideally, you want to transfer high-interest balances to lower-rate credit cards. You should also consider refinancing larger loans, such as your mortgage, in an effort to secure better terms.
Cutting down on the number of accounts you have makes it simpler to monitor your money and keep your finances in check.
Tip 3: Tackle Debt with a Strategy
Consolidating debt is a great way to reduce some of your financial liability. However, paying off, or at least paying down, your debt is even better. Here are two of the most effective strategies used to reduce debt:
- Avalanche method - Focuses on paying off the highest-interest debts you have first.
- Snowball method - Prioritizes paying off smaller debts first with the goal of building momentum (aka getting the ball rolling).
Choose the strategy you believe is most beneficial for you and then come up with a practical repayment plan.
For readers with multiple loans and credit cards, you can call your creditors and ask to lower interest rates. You should also research debt consolidation options that are available to you. One of the best tips is to automate your monthly payments. Automated payments ensure you don't endure any late fees or additional interest charges.
Tip 4: Audit Your Subscriptions & Recurring Expenses
Subscriptions and recurring expenses can add up quickly. Some people sign up for a service via free trial, forget to cancel, and wind up paying a monthly fee for something they don't, or barely, use.
Here are some of the most common subscriptions to double check:
- Streaming Services (e.g., Netflix, Hulu, Disney+, HBO Max)
- Music Subscriptions (e.g., Spotify, Apple Music, Amazon Music)
- Gym Memberships & Fitness Apps (e.g., Planet Fitness, Peloton, Apple Fitness+)
- Cloud Storage Services (e.g., Google Drive, iCloud, Dropbox)
- Subscription Boxes (e.g., Amazon Subscribe & Save, Birchbox, HelloFresh)
Additionally, be sure to review your bank or credit card statements for recurring charges to determine what each is for.
Keep the services you use, cancel the ones you don't. If the opportunity to bundle services is available, consider that option.
For the subscriptions you decide to keep, you might consider paying with a credit card that offers cash back in order to maximize your perks–reducing the overall cost for the service.
Tip 5: Boost Your Savings & Emergency Fund
You'd be hard pressed to find a financial advisor that doesn't recommend saving more money. Savings are a form of financial security, which, in turn, gives you peace of mind.
If you don't have an emergency fund, or if your existing one is lacking, make an effort to save up approximately three to six months' worth of expenses. Small contributions add up over time and if you face a life-changing event, your emergency fund can make a world of difference.
An automatic transfer is a great way to consistently add money to your savings. Other popular methods for funding savings include adding money from tax refunds, work bonuses, or other forms of supplemental income you may have.
Frequently Asked Questions About Personal Finances
Here are a few questions our clients often ask. If you don't see the answer to yours, please reach out to our team directly.
1. How often should I update my budget?
Ideally, you should review how you are saving and spending your income on a quarterly basis. If your spending habits and financial needs aren't too complicated, an annual assessment of your budget may suffice.
2. What’s the best way to consolidate debt?
This question is best answered on an individual, personalized level. When consolidating debt, it's generally a good idea to transfer high-interest balances to low-interest accounts. Your goal is to reduce your financial liability, so be mindful of fees and repayment terms.
3. How much should I keep in an emergency fund?
Three to six months of living expenses provide a nice cushion and is a solid goal when saving for an emergency. If you lose your job, get unexpected medical or veterinary bills, or are in need of an urgent repair, you'll be thankful that you have emergency money tucked away.
4. How can I reduce my monthly expenses?
Subscriptions, impulse purchases, and eating out are a few of the most common household expenses. Cut back where possible. Keep your essential subscriptions. Don't buy it if you don't need it and cook at home more often.
5. What are some easy ways to boost savings?
Automatically transferring a small amount from each paycheck is one of the easiest ways to boost your savings or pay down your credit card debt. Take advantage of cashback programs and credit card rewards. Every little bit helps!
Schedule a Consultation to Discuss Your Personal Finances Today
Use spring as the perfect excuse to get your finances in order. Make a list of essential expenses and those that bring joy to your life. Try to scrap anything you don't use and be aware of subscriptions you may have signed up for, but no longer need.
Remember that small, consistent steps can make a significant impact on your personal finances.
If you need assistance with financial planning, whether it's giving yourself a fresh start by creating a budget and plan for paying down debt, or planning for your retirement, our team of financial advisors can help. Please reach out today to schedule a consultation.