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It’s hard to imagine the warmth of spring when, for many parts of the country, people are still shoveling snow from driveways while frigid temperatures force us indoors. However, as the weeks continue to fly by, it won’t be long before flowers begin to bloom, temperatures spike, and families head outdoors to soak up the sun’s rays. Spring also brings a less exciting ritual we are all familiar with: spring cleaning.
After we grudgingly break out the cleaning supplies and spruce up our living spaces, we embrace a fresh new start when the clean-up is all done. Spring cleaning isn't just for your home. Just like clearing out junk from your closet, a seasonal financial sprucing can help you get things in order and start the year off with a clean slate. Here are five ways to simplify and reorganize your finances:
1. Examine your budget
When was the last time you took a really good look at your budget? Have you had an increase or decrease in your income or expenses? Make the time to review any changes so that you can determine if you need to make adjustments to your spending habits. You can start by pulling out your bank and credit card statements and categorizing your expenses. Necessary expenses include rent or mortgage, utilities, and groceries. Unnecessary purchases would be that morning cup of coffee, clothing you don't need, or the latest smartphone you splurged on. Identifying and cleaning out the unnecessary expenses will help you stay on track going forward.
2. Organize documents
Are you one of those people that has a junk drawer or folder that you pile all of your mail and random papers in? No, that’s just me? It’s amazing how quickly documents and papers can pile up if you don’t stay on top of them. Spring can be a great time to clear out irrelevant or expired “junk mail” and organize important documents. If you don’t already have a filing system in place, establish one for all of your important paperwork: tax returns, mortgage and/or bank statements, insurance documentation, etc. The IRS recommends keeping tax documents and supporting paperwork for three years, but of course, you can keep them longer if you or your tax professional deem it necessary. Take a look at the documents you currently have and be sure to effectively shred anything you no longer need. If you want to be environmentally friendly or eliminate clutter, you can save documents you receive electronically on your computer or laptop.
3. Revisit rates
It’s a good habit to shop around for better rates at least once a year. Whether it’s your car insurance, cell phone, cable bill, mortgage, or other expenses that impact your daily life, reviewing these can sometimes save you more than you think. One of the biggest rate savings can often be found in your mortgage, so if it’s been several years since you purchased your home, it could benefit you to speak with a mortgage loan officer to determine whether it makes financial sense to refinance.
Related reading: If You're Thinking About Refinancing Your Mortgage, Ask Yourself These Questions
4. Automate your bills and savings
Automating your bill payments can be one of the easiest things you do to simplify your finances. You avoid missing payments and late fees, plus, it’s one less thing you have to worry about. If you haven't already, consider automating your savings, too. Do you have plans to take a summer vacation? Now is the perfect time to build your vacation fund by automating a specific amount to a vacation savings account. Automation a great way to put money away before you see it, which can quickly help you build up a nice nest egg.
5. Review your credit report
The Fair Credit Reporting Act (FCRA) requires each of the three major credit reporting agencies to provide you with a copy of your credit report once every 12 months, at your request. Your credit history greatly impacts your financial future. Reviewing your credit report on a regular basis can help you identity theft early, find inaccuracies, and prepare you for a major purchase in the near future. Having a healthy credit score can impact the interest rate lenders are willing to give you on auto or home loans, which can ultimately affect your monthly payments. You can request your annual free credit report at annualcreditreport.com.
Do you have any other great ways to spring clean your finances? Share them in the comments below!
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Financial PlanningMarcia Messer
Marcia Messer is a Loan Officer with SWBC Mortgage. She works tirelessly to help her clients achieve their goal of home ownership and is committed to making the experience positive and memorable. NMLS #: 222428
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