Spring is in the air, and you open up your windows and air everything out, take the chance to give a fresh look to your financial situation. You might benefit from learning to how to spring clean your finances, as well as your house.
Sorting through your financial situation can be overwhelming. Especially when you want to make sure you’re on track to reach your future financial goals — it can feel like a lot of pressure. Here are some practical steps you can take to learn how to organize your finances and keep your financial plan working for you.
Every individual’s and family’s financial situation is unique, and your personal finance budget will likely have some different elements than I’ll describe below. But at least for general purposes, pull out your expense budget and dig in to find where you’re still on track and where you might need to spruce things up a bit.
Subscriptions and memberships used to be limited to fairly specific categories, like gyms, magazines and newspapers. Today, you can find a subscription for just about anything — and for some products and services, it may be the only path to purchase.
Subscriptions are a great business model for companies who want to build customer loyalty and retention. They can also be a way to maintain a steady and predictable flow of income, even after a consumer has forgotten about the subscription and no longer uses it. While that’s great for companies’ bottom lines, it can be deadly for your bank account. One survey found that forgotten subscriptions cost the average American around $350 every year — and that was in 2019, with available subscriptions continuing to explode in the three years since.
Start by compiling a list of all the things you pay for on a subscription basis.
You get the idea. Some of these subscriptions may even be redundant — consider individuals within a family paying for different streaming music platforms to access the same catalogs. Audit your family’s memberships and look for ways to consolidate — or even eliminate — redundant or outdated services. This is also a great way to weed out services you’ve forgotten about or rarely use.
While you’re considering your existing subscriptions, do a little shopping and see if there might be a new service that could give you the same product at a lower rate than you’re paying now, or a way to combine multiple products or services in one subscription. And for any subscriptions you choose to maintain, make sure you’re getting your money’s worth.
Start by taking an inventory of all the life insurance contracts you own. You might have policies through different sources (individually purchased through the marketplace, employer-sponsored, etc.), and you’ll want to collect information on all of them to get a clear picture of your situation.
With those in hand, walk through the following questions:
When you’ve finished reviewing what you have in hand, decide if you’re missing out on some opportunities to protect your family’s financial future. Your review might point out that due to changed circumstances, you may need to increase or decrease your coverage, or perhaps you might want to explore a different type of policy.
Whatever the outcome of this review, I highly recommend talking through what you’ve uncovered with a financial professional to be sure you’re making the best decisions for your situation.
When you start spring cleaning your savings and emergency accounts, you’re going to want to start with an inventory. You likely know already what the various accounts are that you have, but if you’ve changed jobs or gone through some other type of change, you might want to audit your accounts and see if any of them should be combined.
Here are some questions you should ask yourself about your retirement accounts:
After you’ve considered retirement planning, make sure you have your general savings in good shape as well.
A best practice is to have a savings account with at least five months of living expenses in it. Why five months? Before the pandemic at least, it took people an average of five months to find a job, so it’s wise to be prepared for a long search.
If you don’t have one yet, prioritize getting one started. Even if you can’t immediately fund it with five months of expenses, start where you can and increase your contributions over time as you’re able. Once you have that account established, you should leave it alone — consider it off limits, your safety net in a worst-case scenario.
Beyond an unemployment situation, make sure you have an emergency fund set up for major, unexpected expenses. Think a car replacement, a new roof, medical bills, etc. If you have a way to automate your savings, such as an automatic draft from your checking account into a savings account, that will make the process much simpler.
Like I said before, there are many unique circumstances that will impact people’s budget situations differently. Some of these might not apply to you, but if they do, I recommend at least thinking through the following questions.
There are many more opportunities to clean up your household budget, but hopefully this will give you a head start on spring cleaning your finances.Back to Blog