Spring has finally sprung, and many of us take time during the warmer weather to dust off the cobwebs and clean up our homes and clutter.
While making your house tidy is great, what about your finances?
Way more exciting than cleaning the house, this is a way to get empowered financially and achieve your life goals and dreams. You’re already in the mindset of making positive changes, so it’s an excellent time to get your finances in tip-top shape.
Take these steps to get started with your financial spring cleaning:
Automating your investment contributions and savings is a great way to clean up your monthly to-do list. By setting up an auto transfer, money can go directly from your paycheck to your savings account or investment account. That way you don’t have to figure out how much to contribute every month, and you won’t have the temptation to spend that money elsewhere. If you haven’t started setting money aside yet, you should ideally aim to have about 20% of your income allocated towards paying your future self.
Zap away debt
While you’re spring cleaning, you should also be cleaning up any “dirty debt”. Any debt with high interest rates (like credit card debt) can have a major impact on your financial future, and will only become a bigger mess if you ignore it. First, you should check through all your accounts, and figure out what you owe and what the interest rates are for them. Then, you should come up with a long-term game plan to wipe out this debt, by tackling the “dirtiest” (highest interest rate) debt first, and finding ways to make every payment on time.
Create the right habits
Spring is also a great time to reevaluate your budget and your spending habits. Don’t have a budget yet? Start with the 20-30-50 plan.
If you already have a budget, give yourself a high five, and then update your budget to account for any increase (or decrease) in income you have. Then you should try to address any pain points you’re encountering in your budget. Take a look at the times you’ve encountered a budget creep or gone over budget, and address any of the causes behind them. For instance, do you go on a spending spree or shopping bonanza every time your budget is busted? If you don’t address these underlying habits, the same thing is bound to happen again.
Get a high score
You’re legally obligated to receive a free credit report from each of the three bureaus once a year, so spring is a great time to review these (make sure you visit https://www.annualcreditreport.com as it’s the only legitimate site that offers these). Any mistake on these reports can impact your score and your ability to get things like a credit card or mortgage, and could also cause you to pay more for financing. If there’s any damage that’s your fault (like missing payments), you can start taking steps to repair your score and get back on track financially.
A lot can change over the course of a year – and that’s why you should review any investments you have annually at the very least. For instance, if you recently met a spouse-to-be (!) or decided you want to eventually buy a house, you’ll want to make sure your investment plan reflects that. However, that doesn’t mean you should completely change course if the stock market is down in the spring. Your long-term plan most likely accounts for changing conditions, and it should only change course if your goals and needs are significantly different.
Haven’t started investing yet? See our 3 reasons why it’s not at all intimidating to start.
How do you tidy up your finances and get them in tip-top shape for spring? The Tribe wants to hear from you!