It’s still cold outside but we are thinking about the spring, and that means one thing: spring cleaning! While spring cleaning isn’t the most fun thing in the world, it is always a good opportunity to reboot and refresh.
When you think of spring cleaning, you may not think immediately of cleaning your finances, but it’s actually a great time to do so. Today we are going to talk all about the benefits of cleaning out your finances and how you can do so effectively.
Now is a great time to look at what your financial goals are for the next several months. How do you want to prioritize your spending this year? There are a lot of different goals you may have, and those goals can motivate you to make some healthy changes in your finances. They may include:
Saving for a down payment for a house.
Saving for a down payment for a new car.
Paying off credit card debt.
Going on a vacation.
Starting a retirement fund.
Starting an emergency fund.
Expand (or start) your investment portfolio.
Realigning your goals will help you focus on cleaning out your finances and keeping your eye on the prize.
Now that the holidays are over and reality has set back in, it’s a great time to take a look at your budget. With your financial goals fresh in your mind you can see how much you need to save. Going through your budget (or maybe starting over with a clean slate) can help you set yourself up for success.
Account for all of your incoming money in one part of your spreadsheet. This can include your paycheck, any money from a side hustle, dividends, or rental income. Then account for all of your expenses in another part of your spreadsheet. This will include fixed expenses, such as rent and insurance, which does not change from month to month. This will also include variable expenses, which can change from month to month. Variable expenses, such as gas and food, can be averaged out over several months to give you a rough idea of how much you can expect to pay.
It’s good to view your budget in a positive light, knowing that saving money will help you to reach your goals for the future. If you view your budget as a restriction, you will likely not stick to it.
When you go through your budget you should notice what services you are paying for that you don’t actually use (or use scarcely). Subscriptions have a way of creeping up on us. Netflix, Hulu, HBO, Disney+, Peacock–it’s never ending. So it’s good to sit down and see how much each one is costing you, and decide whether or not each one is worth it.
Saving money is easiest when you don’t have to think about it. When you go through your budget you can determine what extra money you may have to deposit into savings (such as the money you freed up by canceling subscriptions). Set up a monthly transfer from your checking account or have a certain percentage of your paycheck deposited into savings. Automating this will help you save with very little effort on your part.
If you are in a position to invest some extra money, there are a lot of apps and websites that can help automate this for you. You can select the level of risk you want to take and these sites will allocate your money appropriately. Acorns, Betterment, and Wealthfront are just a few that offer services like this.
If you have loans, such as a mortgage or auto loan, review the APR and repayment terms you have. If your credit score has improved since your initial financing, you may be able to refinance your loans and get better interest rates and conditions. If you are wondering if you qualify for a car loan refinance, Auto Approve can help you determine if you are eligible.
Refinancing your loans can help you save money by reducing the amount of interest you will pay over the life of the loan. It also allows you to change your repayment plan, which can drastically change your monthly payments. If you refinance to a shorter repayment period you will end up spending more money every month, but you will save a lot of money on interest over the repayment period. If you refinance to a longer repayment period you will significantly lower your monthly payments and give yourself a lot of breathing room every month (although you will end up spending more money over the life of the loan). Either way, refinancing can help you manage your money goals.
It’s incredibly important to keep an eye on your credit report throughout the year. Now is a great time to request a copy of your credit report and carefully review it for errors. When you sit down with it, be sure to check the following:
Review to make sure that your name, address, social security number, employment history, and marital status are all up to date.
Review to make sure that there are accurate records of any lawsuits, bankruptcies, liens and judgements.
Review it to make sure your payment history is correct, that account ownership is correctly listed, that debts that are paid off are listed as so, that closed accounts are accurately noted, and that there is no negative payment information that is older than seven years.
Review this to ensure that you authorized any hard inquiries on your account.
If you notice any errors, be sure to report them to the credit bureaus as soon as possible. Fixing any errors can make a huge difference on your credit score.
As you go through your report, see where you can make improvements. Do you tend to make payments that aren’t in full? Are you a little late here and there? Working to improve your less than great habits can result in a big uptick for your credit score.
If we are talking about finances, why did actual cleaning make it onto the list? Well this is actually a great time to do both. Chances are your house is filled with things you don’t need, use, or want anymore. Clearing out the clutter will help you focus your energy and help you make a little cash along the way.
Go through every room in your house (you can split this up over a few days so it’s not so overwhelming) and go through every item. Sort everything into three piles: toss, keep, and sell. Electronics, furniture, clothes–these are all things that can be sold. You may be surprised what some people will sell. Try selling on Ebay, Facebook Marketplace, or hold a garage sale. Everything else that can’t be sold (or just doesn’t sell) can be donated. There are a ton of organizations that will come and pick up donated items from your house, such as Greendrop. When you put your room back together, be thoughtful of how you organize.
Now is a great time to go through all of your paperwork that is taking up too much space. Do you have bank statements, bills, and other miscellaneous papers hanging around? Chances are you don’t need them. Anything that is important should be scanned and uploaded (and kept with a backup). Anything that is worth keeping should go in a fireproof safe. But most billing statements can be found online and downloaded, so save yourself some work if that is an option.
You should aim for a $0 tax bill come April. If you withhold too much, the IRS has your money locked up interest free. If you withhold too little, you will owe money and have to pay a penalty. Revisit this number to see how you can tweak it to work for you. Consider seeing a tax advisor to get this number where you want it.
As we trudge through the rest of winter, spring is on the horizon. Take this time to recharge and get your finances sorted and organized before the rest of the year flies by. You won’t regret taking the time to sort everything out, as it will likely result in a more comfortable financial situation for the remainder of the year.
Now is a great time to start fresh with a new auto loan. If refinancing your car loan sounds like a good idea to you, don’t wait to contact Auto Approve! Our experts can help determine if you are eligible and help you navigate the process.
So don’t wait, get your free quote today!