Spring is in the air! That warm weather and hours of sunlight motivate us to get things in order, ready to face a new year all fresh and tidy. Did you know that your house isn’t the only thing that needs a good spring clean? Here are four ways to spring clean your finances and reduce your stress level in the process.
THE PAPERWORK
You know that stack of papers in the kitchen…and on your dresser…and spilling out of your “Bills” drawer? It’s time. Time to face the pile, sort the pile, and file it away. Tidying your accumulated paperwork is tedious, but it doesn’t have to be.
- Grab a basket and scan every room in the house for any paperwork (receipts, bills, important letters, etc.) This can be a job on its own, so don’t feel overwhelmed. Split your tasks over a week or two, checking off what gets done as you go for encouragement. Don’t forget your e-bills as well. If you prefer a paper copy, print them out.
- Take your basket of papers and start sorting. Start by sorting your paperwork by company. Use a clean floor or bed so that you can visualize it all. When you are done, you can sort each individual pile by date. Don’t forget a garbage pile and a miscellaneous pile.
Once again, remember that this is a project that should span a couple of weeks. There is no need to get it all done at once. Giving yourself the time to focus and pay attention to detail will pay off.
- Make a list, preferably on your computer or iPad, logging the company name, date, and amount. If you want to go a step further, include the contact number for customer service, as well as your account or policy number. An additional essential piece of information is the due date. Take note of which day of the month your bill is due. This way, the next time you need that information, you won’t be digging through paperwork.
- Whether your paperwork is in hardcopy or digital, set up a filing system. If your bills and accounts overlap, printed and digital, print out the electronic half and add it to your physical papers. Enter your physical copies (just the details) into your electronic filing system. Do yourself and the environment a favour and opt for e-billing as much as possible. Not only will you save on paper, but you will always have a backup in your email or with your online access.
- Going forward. Going forward, designate a small accordion file for all incoming paperwork and keep it accessible to prevent starting paper piles all over the house. Every three months or so (if you are diligent, you can even do it monthly), transfer those already organized papers into your main filing system in your home office. You can also log them into a digital spreadsheet if you prefer to work online. You will be grateful you did when it comes to filing your taxes.
THE AUDIT
An audit is simply an examination of something with the goal of making it more efficient. When it comes to making an audit of your personal finances, there are a few areas that deserve your attention. Remember that small changes you can stick to are always more productive than large, severe changes that will be difficult to follow through on.
- Bill Payments. Review your bill payments from the past six months. Were you late? Did you accrue interest? Did your billing go up? Review each individual service to see where you can improve and save money. You can also try calling your billers and ask them to change the billing date to match your pay dates, if possible. As a rule of thumb, on payday, you want to pay all bills due before your next pay date. You can also ask to renegotiate the interest rates or even take advantage of new promotions that will lower your monthly bill overall.
- Monthly and yearly fees. You should review your bank administrative charges, credit card fees, membership card fees, etc. These small amounts add up and can absorb a significant amount of your hard-earned money. Ask about offers lowering those fees, and if they can’t, you may want to weigh whether or not the benefits outweigh the fees.
- Your budget. That is, if you have one in place. If you don’t have a budget or find the one you are on isn’t working for you, it might be time to try something new. There are plenty of great, simple methods for getting the most out of your income. You can also try using a mobile app that links with your financial accounts, making an efficient review of your spending and revenue. How you plan and execute your budget will make a huge impression on your overall bottom line. Just make sure it realistically fits your personality and lifestyle.
- Your spending. It might feel scary but don’t worry, getting a hold of your spending is straightforward. Review your spending habits for the past three months. Any areas you overspend on can be tweaked slightly, reducing your overall spending. For example, if you notice you spend too much on eating out or delivery, you can reduce the frequency to once or twice a week. You will be surprised at how much you will save.
- Your savings. While saving may seem simple, depending on your needs and how quickly you want to grow your savings, you may wish to seek advice from a financial consultant at your bank. You can also make use of the many amazing online financial blogs and podcasts that can give you great ideas and walk you through the options.
THE DEBT
Make this year the year you climb out of debt and never look back. Debt eats up much of your hard-earned income in interest alone. Freeing up debt means you will be able to save more and let go of the heavy stress that comes from owing money. There are a few things you can do to fast-track the process.
- Assess your debt. You will want to list exactly what you owe; the company, total amount owed, and interest rate, along with your account number. List them in order of interest rate, highest to lowest.
- Renegotiate interest rates. Call the individual companies and see whether or not they can lower your interest rates.
- Make a plan. Attack the most significant interest rate first. You will want to pay the minimum amount due for the other debts while you focus on the one. Calculate how much you need to pay each month (the maximum amount you can) to pay off your focus debt as soon as possible. TheBalance.com offers a free debt calculator to help you figure out the numbers. Once you pay off that account, move on to the next highest interest rate, and so on until you’ve paid off all your debt.
- You can seek consolidation for your debts, streamlining the process so you can make one payment each month with one interest rate.
- Slow and steady. Remember that paying off debt is not an overnight achievement. You need to move slowly and pay what you can actually afford in order not to accumulate more debt via late payments, etc. Just stick with it, and you will accomplish what you set out to do.
THE DON’TS
When it comes to spring cleaning your finances, there are a few don’ts to remember. They might seem like a good idea, but they will surely backfire. Nerdwallet.com lists five don’ts, three of which are on our list too!
- Don’t go all out. Just like with your debt, your goals need to be realistic for your current financial situation and your lifestyle. Making cuts or changes that are too extreme will be hard to keep up with and discouraging if you don’t succeed.
- Don’t close cards. It may feel wise to just close hazardous credit cards but doing so will affect your credit score in a negative way. It’s also good to note that you will want to keep your balance below 35%, as using too much of your credit also damages your credit score.
- Don’t misuse your tax return. Who doesn’t love a tax return shopping spree? However, it is wiser to use that return to build an emergency fund or pay off debt.
It’s time to embrace the sun, open your windows and freshen up your personal finances.
Credito is a Canadian company that is invested in its clients. Offering small, online loans are simply one aspect of our efforts to help hard-working individuals through hard times. We are passionate about providing the necessary tools needed to succeed in personal finance. You can always count on our professional, discreet and humane service.
