When spring rolls around each year, there is no better way to start fresh than with spring-cleaning your finances. While most people associate spring-cleaning with wiping down walls and dusting blinds, spring-cleaning your finances can be even more rewarding than a squeaky-clean home. So, what does it mean to spring-clean your finances, and where do you start? Keep reading for these answers and more.
Review your budget
Before spring-cleaning your finances, you need to know what you are up against. Enter the budget. If you do not have a budget, now is a great time to start one; if you have a budget, take a close look at how much you earn, how much you spend, and any potential gaps or areas for improvement.
Reviewing your budget is of paramount importance for those who have switched jobs, purchased property, had a child, or experienced significant financial changes in the last year. Whether you have seen an increase in income or spending, going through last year’s budget and adjusting to reflect your current financial situation should be a top priority.
The average European has roughly four digital subscriptions and spends €1,560 annually on digital services like video and music streaming. Recurring charges can quickly go unnoticed, resulting in hundreds of euros going to waste each year. Getting rid of unused or unwanted subscriptions can free up additional money for paying off debt or boosting savings or investments.
Consolidating debt is always a wise decision for individuals with high-interest loans. High-interest debt can slow down savings and investments, and spring is the perfect time to do away with bad loans, repay debt, and set yourself up for financial success. One popular way to consolidate debt is by transferring existing balances to a new credit card with a 0% introductory rate and paying off the entire balance before the introductory rate ends. Other debt consolidation options include taking loans against your assets, locating an online peer-to-peer lender with a lower rate than your current loans, or exploring a debt consolidation program.
Shredding old documents and opting for paperless financial statements can help you declutter and better manage your finances. Paperless billing and financial statements provide greater security than physical statements by mail, plus the added benefit of saving trees. Some companies also charge for mailing paper statements, so going paperless might save you a few euros each month. Finally, paperless documents are unlikely to be lost or destroyed and can be conveniently accessed anytime, from any place.
Check your credit
Your credit score represents your reputation as a borrower, giving you the power to make sizable purchases. You should regularly check your credit score to ensure you have not become the victim of fraud and that no errors or inaccurate information are present on your credit report. Using spring-cleaning as a reminder to check your credit each year can help you quickly address and resolve any problems on your credit report.
Setting up automated savings takes the manual effort and thinking out of working towards your savings goals. Many people struggle to adhere to their budget and fight impulse spending, which can often bump savings down the list of priorities. By switching to automated savings, you can skip the hassle of setting aside money each month, build savings into your budget, and know exactly how much you will save by year’s end.
Review your insurance coverages
You should review your insurance coverages to make sure you are not over or underinsured each year. Being underinsured could expose you and your family to unnecessary risks, but having insurance coverage beyond what is necessary is wasteful and costly. Since your financial situation changes every year, taking a closer look at your insurance coverage can help you balance your coverages and only pay for what you need. Furthermore, having adequate insurance is vital for every sound financial plan.
Creating a will is never easy, but it is crucial. If you have not already written up a will, spring is an ideal time to prepare for the future by reviewing your assets and organizing your affairs. Should you already have a will in place, you may want to consider updating it to reflect any necessary changes in beneficiaries or executors and add any new assets you may have acquired. Though many people recoil at the idea of creating a will, this legal document can provide you with peace of mind, preserve your legacy, and ensure your wishes are successfully carried out on your behalf.
Goals are meant to be challenging but attainable. We will always advocate for having financial goals relevant to your present financial position. This means resetting your goals to continue doing your best. By setting new goals, you can continue to advance on the road to financial freedom.
Your financial situation is not static, and neither should your goals be. Spring-cleaning your finances is more than just tidying up here and there—it should push you to do a little more every year.