Managing personal finance is one thing you have to take seriously and financial spring cleaning can help with it. At about this time of the year as spring comes in, your finances can benefit from some serious housekeeping. There are a lot of areas you can look into to help you make adjustments and improve your finances.
You need to audit your finances and see how they pair up with your goals in life. Remember that your goals and your present financial condition can change over time. This is the reason why looking at money management approach can be beneficial in the long run. Here are a few things to consider.
Reevaluate your budget
Gallup.com that less than half of American consumers prepare detailed budgets for their households. Spring can be a good way to get started and evaluate the same if it is still in line with your goals. At the very least, you need to have an idea what your income is every month. From there, you simply have to list down your expenses. After doing that, try to see if you have enough to cover your needs.
This is where you need to make adjustments in your budget. Reevaluating them with a fresh perspective in mind can steer your budget into the right direction. If you had a big ticket expense in the past few months, you need to check your budget again. It is to ensure that you have enough to cover the changes in your payments. If you are planning a trip soon, checking your budget can help you tweak your savings so you can put more into your vacation fund.
Adjust your investments
One way to manage your budget when you make investments is to regularly check up on them. What you are trying to accomplish with this financial spring cleaning tip is to look at the risk versus your age. You should know by know that you have to diversify your investments. You need not put all your eggs in the same basket as most people would say.
However, you have to understand that risk exponentially increases as you get older. This is because it now adds one factor into the mix – your ability to recuperate losses. If you were a bit younger, you can easily bounce back because you have years ahead of you. As you get older and near retirement, you need to taper down your risk factor. This is to mitigate losses which could dent your retirement fund.
Increase retirement savings
FoxBusiness.com shares that half of American population stops working by the age of 63. You might be decades away from this number but time is always moving. This simply means that sooner or later, you will retire. By that time, you would have to rely on the amount of money you have saved up to cover your needs.
This is the reason why it is a good idea to ramp up your retirement savings as part of your financial spring cleaning. As you look at your budget and investments, you might want to increase the funds allocated for retirement. One way is to max out your 401(k) allocation. This helps you compound your money better. It can even get you more out of a matching program at work.
Assessment of your goals
Do you want to retire early? Are you feeling anxious over the possibility of losing your job? Or do you want to pursue your hobby as a cash-generating activity? These are some of the questions you ask yourself during your financial spring cleaning activity. These goals tend to shape your finances and your budget in the process.
Retiring early is possible but you have to make sure that your nest egg is more than capable to support your old age needs. You can increase your reserve funds if you are feeling anxious about the possibility of losing a job. If you want to pursue a hobby as a financial side hustle, take a look at the investment you need and start saving up for it.
Check your withholding tax deductions
Take a look at your W4 and see how you can make adjustments on your taxes. The idea here is to help lower down your tax refund checks every year. This is because rather than letting Uncle Sam hold the money for you interest-free, you can already use that amount yourself early on.
Automate some processes
If you have already pinpointed some of your goals and adjusted your budget and finances to match those plans, try automation. If you are trying to increase your savings, automate that amount to come out of your checking account every month. If you have recurring bills every month, automate the payment so you do not miss a due date.
There are a lot of benefits in automating some financial processes. One key takeaway is that even before you use the money elsewhere, you are able to save it up instantly. Out of sight, out of mind. You would just see your fund grow over time. Be cautious however in making sure that the main account has funds especially for payments. Trying to draw money from a dried up account to pay for a bill can get you some fines both from your bank and your provider as well.
Put ICE in financial spring cleaning
In case of emergency or ICE is a document you put together to help family and even friends have access to certain financial information when unexpected emergencies happen. This can be as simple as a number to call when you are unconscious in the hospital. Or if you have to fly out for an emergency with your parents, your children and spouse know exactly how to access some of your funds in the bank.
Discard paper and bills
This is one way to conduct a financial spring cleaning around the house. You might have been keeping paperwork and statements for the past few year. This can lead to boxes and boxes of bills that have only been opened once. You can start discarding these statements but you have to make sure that you will not be using them again. This is a great way to simplify your finances.
But don’t just throw them in the garbage. Find a way to dispose of your statements properly. Remember that they contain sensitive personal information. This can be your full name, billing address, and even card numbers. One idea is to shred them before throwing them away. This way, you are more proactive in preventing identity theft.
Check your credit report
It is a good idea to check your credit report as well during your financial spring cleaning. This can help you monitor and check if there are errors affecting your score. You can also see if there are questionable charges that you did not make. You can quickly call up your lender and investigate the matter. It might be a case of identity theft and if it is, it is better to catch it early on.
Financial spring cleaning is a great habit to get into simply because you get to reassess your budget and finances. You are able to change gears to help you get closer to your long term goals in life.