Your finances aren’t so different from your home when it comes to spring cleaning! Now is the perfect time to declutter, get organized and refresh your financial goals; so read on for five steps that will have your finances feeling fresh and clean for the remainder of the year.
Step #1: Declutter Debt
The first step to achieving a clean financial slate is to tackle high-interest debt. High-interest debt usually arises from lingering credit card bills, or high-APR personal or vehicle loans. These types of debt can grow rapidly due to expensive interest payments, making your balance harder and harder to pay off. To declutter high-interest debt, prioritize paying off your debt over other types of spending or savings. While this may mean pushing back some savings goals or drastically lowering discretionary spending, sweeping away high-interest debt is almost always worth the sacrifice.
Step #2: Organize Financial Documents
From bills to bank statements to retirement investment forms, managing your finances can involve quite a lot of paperwork. These days, most of us receive our financial documents in digital form—but it’s still a good idea to develop an organizational system so that you or someone else can access necessary information if needed. Consider writing up a “key” that outlines all your savings, investment, credit and debit accounts, plus insurance policies, and where these records can be found. Creating a “key” is also a great way to remind yourself where to go to regularly review all your account statements.
Step #3: Review Spending
Credit cards, digital payment methods and mobile shopping have made spending more seamless and convenient—but that’s not always a good thing. Automated payments also make it more difficult to keep track of what money is going where. Therefore, a thorough spending review is critical to any financial spring cleaning. Carefully examine all purchases made in the past month, using your online bank accounts to help. How much money went to happy hour snacks? How about entertainment subscriptions? Crunch the numbers and consider how you might adjust spending in the future.
Step #4: Maximize Savings
Out with the old and in with the new! Spring cleaning is an opportunity not only to declutter, but also to welcome in fresh financial habits. Strive to save more by reducing discretionary spending where possible. This process may include canceling entertainment subscriptions and using free streaming services from the local library; joining no-buy groups online and trading items instead of purchasing them new; and cooking more meals at home rather than eating out. You can also automate savings with a club savings account that helps you save for a specific goal via regular payroll deductions.
Step #5: Refresh Your Goals
Maintaining your financial wellbeing day-to-day tends to be easier if you’re working toward concrete goals. Are you saving for a summer vacation? Aiming to pay off credit card debt? Trying to maximize your Individual Retirement Account (IRA) contributions? Use your financial spring cleaning as an opportunity to review and refresh your current goals. If progress is slow, consider setting yourself smaller, more manageable milestones. Or, if you’ve already made good progress, challenge yourself with a new target for the next few months—whether it’s starting an emergency savings account, getting more visibility on a workplace retirement account, or consistently sketching out a household budget every month.