6 Easy Steps to Spring Clean your Finances
Ah! Spring! Such a wonderful time of renewal.
You just feel like your coming alive!
The heck with New Years Resolutions, spring is a much more motivating time to make changes. So why not focus on your finances. Hang those credit cards out on the line, dust off the spreadsheets. Well, maybe not that exactly but there are some simple steps you can take to spring clean your finances and give them a fresh airing out 🙂
Here are 6 things you can start today!
1. Create one place to keep everything together – statements, bills, receipts, paid off statements.
A file folder, to-do bin, or online. It doesn’t matter where, as long as it works for you.
There are some great programs and apps. My favourite is Mint. It works on your PC, or as an app on your phone, and you can connect the whole family. It has great budgeting & tracking tools and pretty graphs and bars. Yay! Fun!
2. Create a Debt Repayment Plan
Start by making a list of each type of credit you have, the amount owing, the interest rate, and the payment you are currently making.
It would look something like this…
|CREDIT||Amount owing||Interest Rate||Monthly payment||Time to pay off – months||Notes|
|Mastercard||$1200.00||18%||75.00||19||call to get lower interest rate2000|
|Line of Credit||20,000||8%||55.00||never||interest only, never paid off 🙁|
Use an online calculator to calculate how long it will take to pay off the debt with your current plan. If you don’t like what you see, play around with the numbers to see what works.
(In the example above the computer comes up with an error message stating that the payment for the line of credit is less than the required amount. A real eye opener for some people. Time to increase THAT payment!)
The most important part of this step: Do not use more on your credit than you can pay off, in full, before the billing period ends. <– I would make this flash in bright colors if I could 🙂
3. Create an expense tracking system
How can you possibly make any headway paying off debt if you don’t know where every cent goes? Don’t panic. You don’t have to break out every category, but I think you might want to once you see how powerful this step can be!
Any method works. Pen & paper, spreadsheet, money-management program, accounting program. Whatever fits into your lifestyle.
4. Clean house and create cash
This accomplishes two spring clean tasks: your finances and you home. Go through the house and look for items to sell online, or at yard sales, or to take to a consignment shop, or donate.
My vblog: Convert Clothes to Cash 🙂
5. Simplify your banking
How many bank accounts do you have? How much are you spending a month on bank fees? Do you have overdraft? Are you constantly in it? Do you struggle to keep track of what needs to be paid when?
There is value in having more than one account.
- A chequing account as you main account. Money gets deposited there. It’s a holding account of sorts. You pay your online bills and leave enough in this account to cover any automatic payments that are coming out before next payday, your bank fees and a bit extra. The rest you transfer to the next account….
- A second spending account. You transfer a spending allotment to this account, leaving enough money in your chequing account for your automatic payments and bank fees and a buffer as mentioned above (I thought it was worth repeating (tee hee). This is the only account you have to monitor between this payday and next. $implicity at it’s best!
- A savings account for occasional expenses that come up throughout the year and other savings goals(these two accounts can be broken out as well)
6. Create a Spending Plan
A spending plan is simply a plan for what you want to do with your money.
As with any plan, it doesn’t always work out the way you want. At least not initially. It takes trial and error. Create the plan, attempt to follow it, figure out what works and what doesn’t, change the plan, repeat.
The goal isn’t to have a perfect plan but create a starting point to figure out what’s next. With a spending plan you will quickly figure out what’s not working. Income too low? Expenses too high? Are you spending optimally on each expense?
A spending plan should be set up monthly and broken down per pay. It’s a road map to what your paying/spending/saving each pay period.
If the above seems like a lot all at once, just pick one or two items to start. Doing anything is better than doing nothing.
Ask yourself, “What is the most important next step for me?”
Stick around for more posts and more ideas on how you can improve your finances.
Wishing you happy, healthy finances.
Mary Ann Marriott
aka Dr Debt