Springtime is a great time to review your finances so you can work toward financial independence. While many are organizing their closets and cleaning out drawers and garages, instead, clean up your finances using these ten tips:
1. Freshen Up Your Budget
Your monthly budget may help you work toward your financial goals and can be revised as your expenses change so you can track your spending. However, your budget shouldn’t be so restrictive that it doesn’t bring you joy; remember to budget for things you desire too!
2. Review Your Debt
Take inventory of your debts this spring, so you understand how much you owe. Write down each account, the unpaid balance, and the monthly payment required. Don’t forget to include overdue small bills, as any unpaid debt obligation can hinder your finances. Once you have your debt inventory, consider using one of these debt reduction strategies:
- Debt Snowball Method – This debt reduction strategy has you pay off your debts by starting with the smallest to the largest regardless of the interest rate. This strategy also helps change spending habits because you use all your additional money toward debt reduction. You’ll make minimum payments on the rest as you work toward snowballing the smallest debt. Start by paying off one debt first, then move to the next lowest balance debt. Pay off your smallest debts first. Focus all the additional money you put toward debt reduction on your lowest debt balance while paying minimums on the remaining debts.
- Debt Avalanche Method – This debt reduction strategy involves making the minimum payment on all your debt and then using any remaining money earmarked for your obligations to pay the bill with the highest interest rate. Using the debt avalanche method will save you the most in interest payments.
- Debt Consolidation Method – Pay down high-interest debts by consolidating them into one or more lower-interest debts. This method may increase the interest you pay, so make sure you have all of the facts before deciding on this method.
3. Revisit Your Financial Plan
Spring is a great time to schedule an annual investment strategy review or update your financial plan. If it’s been more than a year, reach out to your financial professional to get your review on the calendar.
4. Increase Your Retirement Savings Contributions
Increasing or maximizing your pre-tax and after-tax retirement savings contributions helps in two ways. First, it helps you accumulate more retirement savings over time. Second, contributions into pre-tax retirement savings accounts help to lower your taxable income in the year the contributions are made.
5. Boost Your Emergency Fund
An emergency fund is an account used during financial stress to help improve economic security. An emergency fund differs from a savings fund because it provides cash for emergencies, whereas a savings fund is a nest egg for a specific purpose. If you haven’t set up an emergency fund, you should do so this spring. If you have an emergency fund, increase your monthly contribution to save 6-12 months of expenses.
6. Check Your Credit Report
It’s important to check your credit report at least once per year to check for inaccurate information or accounts that may not be yours. Your credit report impacts how much you will pay to borrow or for renewals on contracts such as car insurance. Federal law allows you to access your credit report from a credit reporting agency once per year at no cost.
7. Sign Up For Paperless Statements and Bills
Enrolling in electronic delivery of your statements and bills helps reduce clutter and paper waste while providing secured access to your account information.
8. Use Mobile Apps
Mobile apps help you stay connected to your accounts to monitor your spending and savings. Many banking apps provide budgeting features that categorize your spending and can inform you of your budget progress. Alert features can also inform you about charges and debits to help ensure it was you versus account fraud.
9. Sign Up For Automatic Bill Payments
Automatic bill payments help ensure that you are never late or forget to pay a bill, which can cost you more money. If you haven’t signed up for automatic bill payments for utilities, etc., consider signing up this spring.
10. Close Unused Credit Accounts
Consider closing accounts you rarely use since you may forget about them or risk losing the card. Credit card companies often close accounts not used as a security measure.
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