As the weather starts getting warmer, it’s a reminder that spring is right around the corner. It’s time to start focusing on spring cleaning around your house and tossing out the old and unused, keeping what’s important, and cleaning items you’ve avoided all winter. It’s also a great time to start thinking about your financial spring cleaning and dusting off your financial documents, too.
Getting Your Financial House in Order
When you decide to start getting your financial house in order, it can be tough to know where to start. This can be overwhelming for many people to the point that they never do anything. Financial documents, old bills, and receipts end up stacking up for years.
There may be a feeling of freedom once a person decides to do a little financial spring cleaning eliminating and reducing the amount of paper you’re keeping.
Getting your financial house in order can also include setting priorities, creating a to-do list, creating a budget, and even doing your taxes.
Speaking of taxes, a great time to start working on your financial cleaning is right after completing your tax documents. Since you will need to safely file them away, that’s a great time to start!
9 Easy Tips for Financial Spring Cleaning
- Check your credit report – Get into the habit of checking your credit report at least one time a year to ensure the information is correct. Take time to thoroughly review your credit report to make certain there are no inaccuracies and immediately flag any errors found. You can get a free annual credit report at www.annualcreditreport.com.
- Review or create your budget – Make sure your budget is up-to-date, or create your budget based on your current financial situation. Determine what your monthly expenses are and what your income is. If you need to cut back, this is the easiest way to identify ways in which you might not be aware of where your money is going. Once you have established your budget, you need to stick to it.
- Create a plan to pay down or pay off debt – This goes along with tip #2, but many people forget to incorporate a plan for their debt within their budget. Adjust your budget and make a commitment to paying off your debt. Most financial experts agree to start with the debt that has the highest interest rate. Although you may be tempted to pay off the smallest debts first, you could be spending your hard-earned money paying interest unnecessarily.
- File essential documents and shred non-essential documents – Keep only the documents that you might need to reference at a later time. Keep documents like your tax documents, receipts for warranty items or items you may need to return, insurance policies, and mortgage statements. Create a filing system you will use to stay organized. Non-essential documents could include pay stubs, canceled checks, monthly bills (once verified and paid), and old receipts. Do not just throw non-essential documents in the trash. You should shred them so to help minimize your risk for identity theft.
- Comparison shop fixed expenses – Now may be a good time to shop around and get price quotes or negotiate lower costs with current vendors. Many of these fixed expenses include, but are not limited to:
- Cable/Satellite TV, Internet, Landline Phone
- Cell Phone
- Utilities
- Credit Cards
- Insurance - Auto, Home, Life, etc.
It might also be time to consider canceling some services that you either rarely use or do not use at all, for example, unused gym memberships, magazine subscriptions, or other monthly subscription type services.
- Go paperless – Consider switching to paperless billing/bank statements whenever possible. Today, many companies even offer a discount when switching to paperless statements. Not only will you help declutter your house, but you will also help the environment. You will still have access to your statements through your online accounts. If you need a copy, most companies provide the option to download the statement in PDF format, so you can either save it to your computer or device and print it. Also, be sure to set up your account notification settings to get text or email alerts to ensure you don’t accidentally forget to pay a bill on time and potentially incur additional fees or impact your credit score.
- Set up automatic bill pay – By setting up automatic bill pay for each month, you won’t have to worry about not making a late payment and how that will negatively affect your credit score. You should always verify you have enough funds in your bank account right before the payments are scheduled to be withdrawn.
- Inventory your possessions – Taking an inventory of the possessions in your home can make filing a home insurance claim easier because you will be able to show your insurer proof of what you owned. This will help streamline the claims process. An easy way to take inventory is to take pictures or even a video of all the items in each of your rooms, focusing on the big-ticket items. Also, keep the receipts or take a photo of the receipts for these items in case you have to prove how much you paid.
- Limit the plastic in your wallet – Consolidate your credit cards to as few as possible. Use just one card if you can, as the fewer you have, the easier it will be to keep up with your purchases and account balance. Keep the card(s) with the lowest annual percentage rate.
By coupling your home spring cleaning with a bit of financial spring cleaning you’ll be ready for the rest of the year without all of the clutter and disorganization in your life.
