8 Ways to Spring Clean Your Finances
Every spring we throw open the windows and let in the fresh air, put away our winter clothes and boots and inevitably we start cleaning the house. With the cold weather behind us, now is the perfect time to also declutter your finances.
Spring cleaning your finances is a perfect opportunity to check in on your progress, make necessary adjustments, and set yourself up for success in achieving your financial goals.
Here are 8 actionable steps to help you achieve just that:
1- Clear out your filing cabinet
When was the last time you checked/cleaned out you filing cabinet? We all have them –filing cabinets are where we throw in items and forget about them. I would like you to declutter these cabinets! When I did this last weekend, I found old utility bills from 2010!
According the IRS the average American should keep tax return records for 3 years, and Canadians should keep income tax records for 6 years.
Gather and organize important financial documents such as bank statements, tax returns, investment statements, insurance policies, and receipts. Shred any unnecessary documents that are no longer required and consider transitioning to digital storage to reduce clutter and this can ensure that you have secure and easy access to important documents.
By taking the time to declutter your financial documents and establish an organized system for storage and retrieval you'll feel more empowered and in control of your money.
2- Check in or set your financial goals
Are you on track to meet your short and long term financial goals? If so great! Keep going. If not, no worries, this is the perfect opportunity to reassess your short-term and long-term financial goals and adjust them to ensure that you can reach them. This may involve tweaking your spending, saving and investments, or seeking professional advice.
This is also the perfect opportunity to see how you can set aside cash in your emergency fund. Remember this is an account where you can save up 3-6 months of expenses for unexpected expenses, ie: when the dishwasher breaks, your car breaks down or suffer a lay-off.
3- Review your Spending Plan (aka, Budget):
When most people hear the word ‘budget’ their thoughts immediate goes to a scarcity mindset where it all about saving money, eating ramen noodles (I actually love ramen!) and not doing anything fun.
By using a Spending Plan (budget), this allows you to be more intentional with your money and allocate your income to 4 buckets. In fact, using a Spending Plan, can be one of the best tools to help you reach and maintain your financial goals.
Here is how it works. You allocated each pay check into 4 buckets:
Paying yourself first – 20%
Essentials – 50%
Debt repayment – 20%
FUN! – 10%
Aim to put up to 20% of your take home pay to YOU first. This is funds to saving, emergency funds, investing. If you can’t invest 20% right away, don’t fret, work your way up! Start with 1% and gradually increase with every paycheck. Starting small will allow you to build your financial confidence and this will encourage you to keep on saving and remember a little each and every month can go a long way.
Then allocate 50% of your salary toward your essentials — like rent / mortgage, utilities, transportation, etc.
Then try to put 20% toward debt repayment. If you can tackle the highest interest debt first this may be a way to get you out of debt faster.
Then allocate 10% of your monthly income to FUN! Life is for living so lets be sure that you add this to your monthly plan. to fun – this is when you can spend on anything that you want .
Check out the free spending plan calculator HERE!
4- Evaluate your debt
Take a close look at your outstanding debts, including credit card balances, loans, and mortgages. Determine which debts have the highest interest rates and prioritize paying them off first. Consider debt consolidation options if it can help simplify your payments and potentially lower interest rates.
5- Review your credit report
Obtain a free copy of your credit report from one of the major credit bureaus. When spring cleaning your money, review your credit reports in details and check for any errors, discrepancies, or fraudulent activities. Disputing inaccuracies can help improve your credit score and ensure you have a correct financial history. If you have found errors, be sure to fix these. Once you’ve fixed any errors, consider signing up with a credit monitoring service this can be a way to be made aware of any changes to your credit scores, and also alert you if there is any suspicious patterns that might indicate identity theft.
6- Cancel ALL unused subscriptions!
The average person spends $238 a month on subscriptions, that is over $2800 a year. Now is the perfect time to eliminate the things that no longer serve you, i.e.: monthly subscriptions that you do not use. Take a few minutes to review your credit card statements and take a note of every subscription that you pay for – it is probably more than you think!
After reviewing the list of all your subscriptions, apply a simple litmus test: Ask your self: Do I use this subscription multiple times a week? If the answer is yes, then ask yourself does it make my life noticeably better? All the items that you answered NO, consider cancelling that subscription.
7- Review your insurance coverage
Evaluate your insurance policies, including health, auto, home, and life insurance. Ensure you have adequate coverage for your needs and compare prices to potentially save money on premiums. Consider bundling policies for potential discounts.
8- Update / plan your retirement contributions
Last but certainly not least, whether you want to max out your IRA, TFSA, 401K or RRSP, now is a good time to plan how invest in your retirement savings this year. Review your investment choices within these accounts and ensure they align with your retirement goals.
If you have an employer-sponsored retirement plan, connect with your HR department and calculate the match amount so that you can benefit form the ‘free’ money.
The Bottom Line
Having your finances in order is an important part of our money journey, but let’s face it, we all get busy and we tend to put our finances on the back burner.
Remember, managing your money should not be a chore, so revisit and reassess your financial situation throughout the year to stay on track and make adjustments as needed. If your finances are in order – right on! If it’s not, no worries, just try any of the 9 steps above – you’ve got this!
Your financial spring-cleaning offers a perfect opportunity to check in on your progress. You can tweak and adjust your spending, savings, and investments as needed to put yourself on track for hitting your short-term targets for the end of this year.
So grab a cup of tea, put on some upbeat music, and get ready to give your finances a fresh start. Your future self will thank you!