Getting your financial house in order is one of the most important things you can do for yourself and your family. Trust us when we say your future self will thank you. Since we associate spring with new growth and at least cleaning up the old, we think this is the ideal time to spring clean your finances. Don’t know where to start? That’s ok – we’ve got you covered!
We know that no one likes the ‘B’ word but you really can’t get your financial house in order until you have a budget. You have to know how much money you have and how it’s being used. It’s that simple. Americans spend way too much money without thinking or planning and it can get them into trouble.
Budgeting isn’t scary and it doesn’t have to be hard. We’ve written about it in the past and will provide some links in the Resource Guide below. Whether you use an app or old school pen and paper, your goal is to list your income and every expense you can think of including regular bills, annual expenses, walking around money and how much you are saving for the future. If you have kids in school, your summer budget needs to include school supplies and clothes. If you enjoy travel, there needs to be a line item for those expenses too.
Now look at what you have. Are you spending more than you make? Are you saving for a rainy day? Are you trying hard to not look too closely at your credit card bill when it comes? Be honest with yourself. If you have a spending problem and no way to pay for it, now is the time to get help. If you make plenty of money but still can’t seem to save anything, look for what’s holding you back. If you are living paycheck to paycheck and there’s nowhere left to cut, maybe it’s time to increase your income.
- Find more money. If your budget is ugly at first, there’s no reason to be ashamed but this is the time to find more money. There are two basic avenues for this. Cut expenses or make more. Cutting expenses is an easy place to start. Call your insurance company and ask them to shop your policy. This alone could save hundreds a year. Are you spending money on a vice or maybe on extras that you don’t care about? Cut that gym membership and start using free online resources or hike a local park. Costs are on the rise but how much food do you throw away out of neglect and poor planning? Most employers are desperate for good workers and are willing to pay more to keep a good employee or to entice someone new to accept a job. Ask for a raise or dust off your resume and find something that’s better for you. Look for things to sell or deliver pizzas a couple of nights a week. Finding money is hard but it can be done!
- Pay off credit card debt. Many Americans would be ok if not for the enormous mountain of credit card debt they face each month. Before you do anything else, take control of this debt that’s keeping you awake at night. Use any extra money to pay it off for good and begin using that credit card only when you know you can pay it off.
- Save for emergencies. Everyone needs an emergency fund. Emergencies, both large and small, happen every day of the week but if you have no savings to help, even the smallest problem can feel like a catastrophe. Save whatever you can and accumulate as much as you can. Most everyday unexpected expenses are going to come in at less than a thousand dollars so that’s a great savings goal to start with. A long term goal would be three to six months of living expenses. Just remember that you are saving this money for a rainy day so be sure to save it and forget about it until the need is important.
- Save for your future. When you’re young, the future sounds so far away. However, time has a way of speeding up as you age and life gets in the way. Get into the habit of saving for your future as young as possible so that you can someday enjoy life as a retiree!
- Gather important documents. We all like to think we will live forever and that we will always live independently but life is full of surprises. Gather important documents in one place and make sure your next of kin know where to find it. That means insurance policies, deeds, bank information, investment firm contacts, will and power of attorney. Don’t have a will? Now is the time to have one made.
Spring cleaning your financial house is a chore but it’s an important one and we hope that you will be inspired to start working on these steps. Remember, it doesn’t all have to be done in a day. Begin with the budget and start accumulating a list of opportunities for you to spend more wisely, save more consistently and be prepared for troubles someday.
Click the links below for more guidance on budgeting and saving money!