Spring has traditionally been a time for cleaning our homes and clearing away the clutter that has accumulated throughout the winter. It’s a satisfying approach to the season because it gives us the feeling of starting fresh. There’s no better way to put a spring in your step (no pun intended) than by freeing yourself of unnecessary messes.
And that is true for your finances as well. So why not embrace the concept of a financial spring cleaning this year? Below, we’ll look at ways you can organize your financial life to make sure the rest of your year is as peaceful and prosperous as you’d like.
[Related Article: The First Thing You Must Do Before Paying Off Debt]
It’s safe to say that none of us want to be in debt, and yet for those of us who have debt it can be exceptionally difficult to conquer it once and for all. So why not take this opportunity here at the beginning of spring to organize your debt and make a clear plan for paying it off?
The thing about being in debt is that you often get overwhelmed by the numerous bills, statements, due dates, interest rates and fees. This clutter of paper and percentages and numbers can wear you down.
That’s why a spring cleaning is necessary. Take all your debt accounts (student loans, credit cards, auto loan, etc.) and write down your total balances for each one as well as the interest rate for each one. It might look something like this:
- Sallie Mae Student Loan: $9,000 (6% interest rate)
- Bank of America Credit Card: $2,000 (15% interest rate)
- Macy’s Credit Card: $550 (12% interest rate)
Next, compare the minimum payments and make a plan for how you are going to pay off all the debts. Decide how much you can afford to pay above the total monthly payments and resolve to dedicate the extra towards the debt with the highest interest rate.
At the same time, set up online payments for as many of your accounts as possible to reduce the time you have to spend each month paying bills.
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Organize Your Spending Plan
The other big part of your financial picture is how much you spend each month. A lot of people refer to this as your budget, but it is even more accurate to refer to it as your “spending plan” because it is, in fact, exactly that. You make a plan for where your money will go each month and then at the end of the month you tally it up to make sure you followed your plan.
But many of us don’t actually do this. Why? Because it seems complicated and/or tedious.
However, by taking this golden spring opportunity to organize your thoughts and get your spending plan written down, you’ll be more likely to follow through on actually sticking with it. Start by looking at your statements from last month to see how much you spent and which categories that spending went to. Then list out the categories and write a number next to each one signifying how much you plan to spend on that category this month.
Next set up a simple spreadsheet that you can use to enter your spending as the month goes along. It shouldn’t take too long — you just need a place to enter the numbers. As the month goes along, look at your spending totals and adjust your behavior if necessary to meet your goal.
You may also want to decide on one method of payment, whether it’s using cash, a debit card or a rewards credit card. The advantage of using cash is that it makes you less likely to overspend. Whereas the advantage of a debit card is that you can easily track your spending via the online account (or paper statements). Either way can work, so decide which works best for you.
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Organize Your Files
Finally, whether you keep your financial documents in a folder next to your desk or in a folder on your (digital) desktop, take a little time to get these sorted out.
Where do you keep your credit card bills? What about your student loan statements? Your budget? Life will be easier if the answer to all these questions is the same place. That way, you know exactly where to go whenever you need to look up any financial information. Keeping things simple is the key to greater peace of mind.
And isn’t that what spring cleaning is all about?