In the springtime, many people want to change their wardrobe, reorder their residence, and do something new for themselves. And if you need something to consider, think of cleaning your finances.
Take hold of the spring cleaning season to go through your financial life to retarget and readdress your financial habits. Create a plan that will set a tone for progress and success in your finances.
Read on to uncover ways you can sweep clean your finances.
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1. Get Rid Of Old Spending Habits
Clean out those wasteful spending habits once and for all!
Use spring as a time to determine which habits don’t contribute to your finances and make necessary changes.
Spend a few minutes looking over your spending for the past week. Do you see any patterns? Or areas where you can cut back? Make some small changes and create space in your budget for those bigger items like summer vacation!
Break these old financial habits that no longer serve you and replace them with new and improved ones if you want to get serious about your finances.
It’s no surprise that the majority of spring breakers spend on a variety of non-essential items. Those who vacation in Europe could spend over $2,000 on shopping alone, according to Gallup polls.
One of the best ways to make sure you stay on track with your finances is to understand what you spend your money on and where you waste it.
Instead of going cold turkey, and shutting down suddenly on these poor financial habits you’ve enlisted, reduce the habit gradually and make improvements on the change. Otherwise, a sudden transition may come with a harsh price on you.
For instance, if you buy an iced latte three times a week, consider reducing your consumption to once, twice a week, then once, and so on, till you have successfully adjusted to a new and healthy financial life.
2. Dust Off Your Budget, And Start One!
Clean up your budget and start budgeting if you have not been doing so lately. If you have, then bring it up again and make sincere adjustments to it. Putting your budget in place will help you attain major milestones in your finances. From clearing out long-overdue debts to saving up for a down payment on your new home.
Budgeting is one of the most important factors for financial success. It helps you discover how much you’re spending each month, as well as areas where you can save money. You can even use a budget to help meet your savings goals.
A budget is a plan that guides your spending and saving. It outlines what you’re going to spend money on and how much you plan to spend each month, so you can make sure your spending aligns with your values and priorities.
It ensures that you don’t spend more than you earn, which can help you achieve financial stability.
When you create a budget, you can understand exactly how much money is coming in each month, and how much out. By subtracting your expenses from that amount, you can get a clear picture of whether your income is profitable for you.
The first step to creating a budget is determining your income. This includes the money you receive for the month from you and your spouse’s jobs, investments, and any other sources of income. List the total amount of each source of income separately on a spreadsheet.
The next step is listing all bills due for that month. Review bank statements, retirement and mutual fund statements, credit card statements, and more to include all recurring and irregular expenses. Calculate the percentage of your income that goes toward savings from each paycheck and write it down as part of your budget.
Next, list annual expenses as well as irregular or one-time expenses you incurred in previous years which may arise again this year (e.g., car registration).
Finally, estimate other living expenses like groceries, eating out, and entertainment.
Budgeting is an ongoing process to know and understand how much money you make and spend.
3. Work On Your Late Payments And Catch Up On Them
It’s time to get a handle on your late payments. If you’re behind on payments, or if you’ve stopped paying down your debts completely, it’s time to work out a way to pay them off and move forward.
Set money aside and try to resolve it as quickly as possible. Make a yard sale and collect items that you can sell to generate more income. You can also do a spending fast to save money used on non-essentials.
Create a savings plan or organize a yard sale to help raise money to settle past due balances. You need to find a way to get your finances back in order so you can take advantage of all of the great deals available during the holiday season.
You should consider approaching each creditor individually with a settlement offer. Many creditors are willing to negotiate on the amount of unpaid debt if you offer in writing that you will be able to make regular payments until the debt is completely paid off. You should never get into the situation again where you miss a payment or stop paying down your debts.
If you are behind with any payments or in debt, there is hope for you to pay off everything and save money for good.
4. Snowball Your Debt
The snowball method is one of the quickest ways to reduce debt. This method focuses on your smallest debt first, with the goal being to get rid of debt as soon as possible.
Once you’ve paid off your smallest debt, you move on to paying off your next smallest debt. You continue making minimum payments on all other debts and making extra payments towards your next smallest debt.
Once you’ve paid it off, you focus on the next smallest debt, until finally, all that remains are the largest debts. The snowball method of debt reduction is one way to pay down your debts and regain control of your finances.
This approach focuses on paying off your smallest debts first, while also making the minimum payments on other debts. As you eliminate smaller debts, you have more money to dedicate to larger debts.
The goal of the snowball method is to reduce debt as quickly as possible.
Here’s how it works: make minimum payments on your debts – except the one with the smallest balance.
On this debt, pay as much as you can each month. Once you’ve paid it off, take that money, plus any extra you have, and put it towards paying off your next smallest debt. Once you’ve paid all of your debts, start contributing the same amount, plus the minimum payment on your first debt, to a savings account.
This technique can free up money you would have paid over time in interest, allowing you to make longer-reaching financial goals and will help you get out of debt sooner than you would by paying only the minimum.
5. Gear Towards Your Financial Future
In the springtime, you want to start planting and yard for the coming year. The same applies to your financial future. If you want to save for your first home, plan for retirement, or attain other major financial goals, then start setting up the plan for it.
Take time to plant the seeds you need for your future by creating that plan with clear goals. As time goes on, you can make adjustments where necessary.
Below, find a few ways to start moving your money forward
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Kickstart an Emergency Fund
We’ve all been there: A flat tire, a hungrier-than-expected toddler, dinner with friends. Life’s full of unexpected moments, good and bad. Starting an emergency fund allows you to have a regular amount of cash at your disposal for unexpected major expenses and life events that can happen at any time.
By having at least three to six months’ worth of living expenses, it can help alleviate financial stress in the case of emergencies and unexpected bills.
An emergency fund is a savings account that you never touch and can be used only when something unexpected happens, such as a job loss, medical bill, or natural disaster. If a crisis hits, this fund is your lifeline—and it will protect you from going into debt.
They aren’t just important — they’re vital. This high-yield savings account is specifically designed to help you build a safety net that can be used in the event of an emergency, like getting into a car accident or coming home to severe flooding. The savings account allows you to save for the unexpected with peace of mind.
Savings accounts are a safe place to deposit emergency funds. Your cash is FDIC-insured up to $250,000 in the event of a bank failure. You can only make six withdrawals per month, so your emergency fund is protected from overspending.
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Consider Investing
Investing is the act of allocating funds, usually with the expectation of generating income or appreciation.
Examples of investments include stocks, bonds, and real estate. The term speculation is also used to refer to investments that are very high-risk and are usually not long-term. Investing in your 401k retirement plan is another way to start investing, due to employer matching contributions.
Investing is the logical next step after you have paid off debt, started an emergency fund, and began saving for retirement. Depending on your investment goals and risk tolerance, you may choose to work with an investment advisor or buy funds or stock on your own through online brokers or platforms.
If you’re new to investing, take some time to understand the various types and see if any seem right for your needs.
When you invest, your money is working with little to no supervision on your part — depending on your choice of investment.
