10 Tips for Financial Spring Cleaning
Now that the latest bomb cyclone has past, we’re moving quickly to the start of spring. As the weather warms up, it’s the right time to freshen up your finances. You want to clean away the winter clutter and get yourself set up for the rest of the year. This financial spring cleaning checklist can help you get ahead.
We also invite you to join Consolidated Credit’s financial coaches on Wednesday, March 14, 2018 at 1:00 PM (EST). They’ll be hosting a free 1-hour Financial Spring Cleaning webinar that you don’t want to miss!
#1: Adjust your budget for warmer weather
Your budget can change seasonally, so it’s important to review it occasionally. This allows you to make adjustments to ensure you maintain a balanced budget through summer. Here are some of the adjustments you may need to make as we head into warmer months:
- Your electric bills can be much higher in summer than they are in winter, especially if you live in the warm southern states. Check your highest bill from last summer and adjust your budget accordingly.
- Water bills also tend to increase for everyone in summer. You use your sprinklers and may be regularly refilling your pool. Again, check the bills from last year to plan ahead for this year.
- Transportation costs
- Gas prices are also usually higher in summer. So, put a little extra padding into your gas costs now; that way, you won’t be overspending on transportation costs
- You can also budget in for maintenance. If you haven’t gotten an oil check or fluids lately, allocate money soon so you can take your vehicle in. regular maintenance helps you avoid more expensive repairs
- Summer entertainment costs
- Discretionary expenses for entertainment tend to go up during the summer, especially if you have kids. When the kids are out of school, you need to allocate funds to keep them entertained.
- OR you may need to plan ahead for their activities, such as summer camps.
- Summer services
- If you pay someone to mow your lawn, make sure to include increased landscaping costs for summer into your budget
- You may also have higher childcare costs, if you hire someone to stay with the kids while you go to work.
Again, most of the expenses will gradually increase as we head towards the summer months. If you adjust your budget now in spring, then you can be confident that the increased costs are already covered. And any cost savings that you have right now can be funneled into extra savings!
#2: Cut services that you aren’t using
Review all the recurring expenses that you have in your budget to make sure you’re still using the services. Often, we sign up for services that we think we’ll use constantly, only to forget about them in a few months. What’s more, many of these services may be on a one-year subscription. That means you may forget about it completely until your account gets charged.
Review your statements from last year to make sure you’re still using all the services you’re paying for. This includes:
- Movie/TV streaming services
- Music streaming services
- Gaming networks
- Service referral networks, like Angie’s List
If you have overlapping services, make sure you need both accounts. For instance, let’s say you have Netflix and Hulu. Do you really need both? If your family doesn’t watch them enough to justify two recurring cost, decide which one you’re willing to lose.
#3: Review your bills to eliminate overages
You should also review all your bills to make sure you’re not overpaying for features or services that you don’t need. This financial spring cleaning checklist for bills can help you close spending leaks:
- Do you watch all the channels in your cable package enough to justify paying for them?
- Do you consistently use less data than you’re paying for on your mobile plan?
- Are you paying for home phone and internet services that you don’t need?
- Have you done an energy efficiency check with your power company lately? (Hint: Many companies offer these for free!)
#4: Allocate your savings to achieve your goals
What are your savings goals for the year? You may have set some priorities when you made your financial resolutions for 2018. Are you still sticking to them?
Whether you set priorities at the beginning of the year or not, financial spring cleaning is the right time to think about your goals and what you need to save for this year. Then you can earmark funds in your savings account for specific purposes. This can include:
- Money for summer vacations
- Big-ticket purchases, such as electronics or furniture
- Down payment funds for car or hoe purchases
Allocating money in savings is a smart move because it helps you avoid big credit card purchases. If you pay for your family’s entire summer trip on a credit card, you could be paying off the debt for the rest of the year (or longer). Better to set a little money aside for each goal, so you can cover these big expenses without credit.
Remember, ideally, you want to save about 5-10% of the money you take home each month. Portions of that money should go towards different goals.
#5: Start saving for the big shopping seasons now
In addition to specific savings goals, you also need to start saving for the two biggest shopping seasons of the year:
- Back to school
- Winter holidays
If you have kids, August-December can be really tough on your finances. Even if you don’t have kids, the winter holidays almost always lead to higher spending. So, you should direct some of your savings to covering these shopping seasons. The more you can save up now, the less likely you are to generate credit card debt towards the end of the year.
#6: Make a plan if you’re still paying last year’s debt
Speaking of end-of-year credit card debt, have you paid off all your 2017 holiday shopping sprees yet? If you relied on credit cards heavily at the end of last year, then chances are you’re still paying off the balances now. By now, high interest charges are steadily increasing the cost of those 2017 purchases. If you stick to minimum payments, you can easily double the cost of purchases with interest added.
So, make room in your budget to focus on debt elimination now. Ideally, you want to get all your credit card balances back to zero. That will make any end of year debt that you take on easier to manage. If you need help crafting a strategy, visit Consolidated Credit’s Debt Reduction Guide. And if you owe more than $5,000, it’s time to seek debt relief!
#7: Check your debt ratios to make sure you’re on track
It’s a good idea to regularly check your debt ratios to make sure that you’re not overly indebted. This will help you avoid debt taking over your budget. It also ensures that you can get approved if you apply for financing.
- Debt-to-income ratio measures your total monthly debt payments versus your income. Your ratio should be less than 36%. That way, when you apply for financing, you can get approved (Your ratio must be less than 41% with new payments factored in to get approved.)
- Credit card debt ratio measures the minimum payment requirements on your credit cards versus your take-home income. Those payment should take up no more than 10% if your income. Any more means that you need to consolidate.
#8: Clean up your credit report
If you haven’t done so already this year, take advantage of your free annual credit report. By law, every consumer can receive a free copy of their credit report from each credit bureau every twelve months. So, if you haven’t downloaded your reports yet this year, head over to annualcreditreport.com.
When you get your reports, pay close attention to any negative items that are shown. Some may be legitimate penalties you’ve incurred. However, others may be mistakes and errors that you need to correct. If you find any of those, it means you need to go through credit repair.
#9: Talk to your insurance agent to identify potential discounts
This is another good idea to do at least once per year. You basically need to talk to your insurance agent (or agents) for a quick discussion. Good agents may be reaching out to you already for an annual review, so just reply and let them know that you’re interested.
Check to see if you qualify for any new discounts. Ask about changes you may have made to your property that might lead to extra discounts. For instance, if you recently upgraded to impact resistant windows, you may get a discount on your homeowner’s insurance.
#10: Don’t forget your finances during disaster prep
May 31st marks the official start of hurricane season. You also have rainy seasons that mean more twisters in Tornado Alley and potential flooding elsewhere. Towards the end of summer, we’ll also be facing more fire seasons in the West.
Part of your disaster prep should be getting financial documents in order in case you need to leave quickly. Get a watertight folder or envelope where you can store documents, such as:
- Titles and Deeds
- Proof of residence
- Stock certificates
- Family Records and Wills
- Bank statements (most recent)
- Credit card statements (most recent)
- Insurance statements
You should also include the contact information for your insurance claims department. This is not always the same as your agent’s contact information. Having this information will ensure you can start to recover immediately.
Finally, add some emergency cash into your watertight storage container. This will help you after a disaster occurs if ATMs and credit card readers aren’t working.