Depending on your personality (or the personalities of your loved ones), spring cleaning is either something you look forward to or something you dread. For some, they look forward to a yearly excuse to tidy up, declutter and organize a year’s worth of things that have piled up. For others, they know that it has to be done so they do so begrudgingly. And for some, they know that spring cleaning is something that they should be doing but they never seem to get around to it.
Just like spring cleaning your home can help organize, declutter and brighten your physical surroundings, these financial spring cleaning tips can help organize and make sure that your finances are in order. Here are six ways to spring clean your finances:
Revisit (or start!) Your Monthly Budget
Some people think that the word “budget” is just another six-letter word, but properly implemented, a budget is a great tool to make sure you’re only spending money where you want to spend it. It can help you cut things that are NOT important to you so that you still have money to spend on the things that ARE important to you.
If you have never set up a budget, consider a tool like Mint. Mint will automatically track your spending and help you categorize and budget your finances. And if it’s been a while since you’ve regularly reviewed your budget, consider making a budget review as one of your financial spring cleaning tasks.
Set Medium and Long-term Financial Goals
Once you’ve paid a little bit of attention to your day to day transactions, now it’s time to make some medium and longer-term financial goals. Sit down with your spouse, partner or loved ones and ask yourself where you want to be in 3, 5, 10 or 30 years. Are the financial choices you’re making right now likely to lead you where you want to go? If not, identify simple steps that you can take now to put you on the right path.
Make a Plan to Pay Down or Pay off Your Debt
One of your medium or longer-term financial goals should be the elimination of any outstanding consumer, credit card, student loan or other debt. If you have any debt, make a plan to pay it down or pay it off. Depending on the total amount, this can feel overwhelming, but ignoring it will not make it go away. Take the time plan out how you can pay off your outstanding debt obligations.
There are several different strategies to pay down your debt. Some people advocate for the “snowball method”, where you start by putting all of your excess monthly savings towards paying down the debt, starting with the smallest balance. Others prefer to pay off their debt with the highest interest rate first. For some, debt consolidation can be the right move. But at the end of the day, the exact mechanics are not as important as just deciding on a plan and sticking to it.
Make Sure Your Life Insurance and Wills Are Up-to-date
Another financial task that’s good to review regularly is making sure that your life insurance and wills are up-to-date. Not having any life insurance is one of our common debt mistakes. If you or your partner were to unexpectedly pass away, where would that leave the survivor? The same question goes for having a will. If the worst were to happen, the last thing that you’d want is for the surviving partner to have to deal with financial uncertainty at the worst possible time. If you do have a will and life insurance, make sure to take another look at it and verify that the information is still correct.
Check Your Credit Report
As part of your financial spring cleaning, it’s a good idea to periodically review your credit report and ensure that there aren’t any inaccuracies or incorrect information. Your credit report drives your credit score, so having incorrect information on your report can drastically lower your overall credit profile. This can cause you to be denied credit or pay more with a higher interest rate.
With Turbo, you can view your credit report at any time, without it impacting your credit score. If it’s been a while since you last reviewed your credit report, there’s no time like the present!
Shred Old Financial Paperwork
Spring is another good time to take a look at old paperwork and shred any old financial documents. The IRS typically recommends that you keep at least 3 years plus the current year of your tax returns. You’ll want to keep other records such as those pertaining to assets you still own (like your house, car or stocks that you still own) longer. But, that bank statement from 5 years ago to an account that you don’t even have anymore? Time to shred that and declutter your storage space!
Hopefully, these financial spring cleaning tips will inspire you to get out there and set (or keep) your financial house in order! Leave a comment on which one you’re going to try first!