Ahhh, Spring. The season of new beginnings. The days are a little bit longer, the sun is a little bit brighter, and a rogue Christmas decoration still lingers in your house somewhere unnoticed. It’s the perfect time to dust off the cobwebs of winter and create clean, open space in your surroundings.
Another major perk of spring is how natural a time it is to streamline finances. If you’re already going all Marie Kondo on your kitchen closet or spending a Sunday flipping your wardrobe from winter to spring, why not take a few extra steps to tidy up your financial affairs?
With tax season in the rearview mirror and warmer months just ahead, these six financial spring cleaning strategies can help you breathe some fresh air into your finances:
- Circling Back to Your Budget
Putting together a budget is kind of like the financial equivalent of organizing your closet. A budget is a tool that helps you ensure you’re spending money where it counts and keeping track of that spending within specific budget categories. Spring is a great time to take stock of your existing budget or start one from scratch.
Reviewing your current budget involves evaluating how much money you’ve allocated to each budget category and adjusting it accordingly. For example, if you’ve been setting aside $5 a day for takeout coffee and notice you tend to have a cup at home, you can re-designate those coffee funds to another budget category like gas or entertainment. These small tweaks, over time, could help you find areas for improvement and create better financial habits.
If you don’t already have a budget, here’s some information on creating a budget.
- Setting a Few Financial Goals
After you’ve had a chance to create or revisit your budget, it can be a good time to set a few financial goals based on your findings. Thinking ahead about where you see yourself in 5,10, 20, or 30 years, do your current financial habits pave the way for you to achieve that vision?
Do you want to pay off your existing debt by a certain time? Save money for future college tuition for you or a loved one? Purchase a new home? Build a substantial emergency fund in case you need it someday? Listing your major financial goals is a proactive place to start this spring.
- Updating Estate Plans and Insurance Policies
Has reviewing the status of insurance policies, wills, and estate plans simply slipped your mind? It happens to the best of us. Spring can be a good time to scan through some of these documents to see if they’re up-to-date, particularly if there have been any major status changes in your life like a big purchase, birth of a child, or a new marriage. It could be a good idea to update your beneficiaries or ensure your life insurance policy is current and renewed. Or, if you don’t currently have life insurance or a will, you might use this time to start the process.
Without your long-term loose ends tied down, you could be creating financial uncertainty for your loved ones if the worst case scenario were to ever occur. You can spring into action by verifying or updating existing information or reach out to an estate planner to begin putting these plans into place.
- Investing in a Shredder
Speaking of estate plans, financial statements and policies, they often come with a whole lot of paperwork. You might have a looming stack of financial files lurking in your home somewhere. Spring is a solid time to review those paper piles and put the ones you don’t need through a microcut paper shredder.
While some files might be wise to keep on hand, i.e., the previous three years’ tax returns or important asset information (e.g., your home, car, stocks, bonds), many hard copy files are probably outdated and irrelevant, for example, a credit card or bank statement from two years ago. To save space and protect your privacy (since some of these files contain confidential information), shredding outdated financial paperwork is one of the safest, most effective methods of document disposal.
- Checking Your Credit Report
While you’re on a roll reviewing all those policies, plans and financial statements, it could be a good idea to check your credit report and see if the information is up to date there as well. Your credit score is driven by the data in your credit report, so if there are any inaccuracies, it could have a serious impact on your overall credit profile. It might be wise to hop in there and give it a good review this spring.
- Making a Debt Paydown Plan
After you’ve outlined your financial goals, paying off credit card debt could be a key item on the financial spring cleaning list. Whether it’s student loans, credit cards, retail charges, car loans or personal loans, making a paydown plan to tackle each outstanding debt is a helpful way to start prioritizing that “financial clutter.” Consulting with a debt payoff calculator can give you a better sense of how long it will take to reach your goals.
One paydown strategy you could try is the debt snowball method, which involves paying extra money each month on existing debt, starting with the smallest account balance and working your way up. You can also prioritize the highest interest rate accounts first using the debt avalanche method. Or, consolidate your debt to roll several different debts into one monthly payment, so you don’t have to worry about simultaneously paying down multiple accounts.
Whatever’s on your unique financial path, spring is a great time to start laying it out. The ground is thawed and there’s new growth at your doorstep. Using these financial spring cleaning strategies can be the motivation to clear the financial clutter and start fresh.
With Tally, you can see the progress you’re making on your financial goals, de-stress credit card management, and more easily take control of your financial future. As you ponder the new season ahead, it’s a great time to make serious debt reduction a serious reality!