4 Tips for Financial Spring Cleaning
It's that time of year again: Time to sort through the clutter and get your life back in order. But one area you might not think about reorganizing? Your money.
While you're scrubbing baseboards and organizing yard sales, consider taking a break to spring clean your finances too. It's a great time to sit down and re-evaluate your financial situation while you're in the right mindset.
Not sure where to start? Here are some ideas.
The average American spends $18,000 a year on non-essentials. That's a lot of money that could be better used elsewhere!
Review your budget and cash flow
When was the last time you stopped to evaluate your budget? If it's been a while, there's a chance you're overspending (or even underspending) in certain areas. For example, have your utilities crept up over the years? Are you paying down debt as aggressively as you could?
You can use a good, old-fashioned spreadsheet to get a handle on where your money is going. Take a look at how much of your income goes toward major budget categories. If your overall budget regularly ends up in the red at the end of the month, it might be time to make some spending cuts to get back to cash flow positive.
Clean up your spending
Even if you're doing well in terms of staying in budget and meeting your goals, there's always room for improvement. You might be surprised how often you spend money when you don't really need to.
Now is a good time to evaluate whether to make impulsive purchases on Amazon or order meals from Postmates too often. While you should definitely spend money on the fun stuff every now and then, keep in mind that the average American spends $1,497 a month1 roughly $18,000 a year on non-essentials, such as eating out, ridesharing, impulse purchases and personal grooming (pretty much anything that isn't a direct living expenses like rent, groceries, and utilities). That's a lot of money that could be put to better use!
Ditch recurring expenses you don't need
Once you've taken a high-level look at your finances, it's time to go back with a fine-toothed comb and find those sneaky recurring expenses that you didn't realize were occurring.
For example, pull up your bank account statements and check for monthly fees that could be eating away at interest earnings. It may be time to switch accounts, or even banks, to save on fees.
Re-evaluate all your subscriptions and memberships and find ones you might want to cancel. Do you need Netflix and Hulu and Amazon Prime? Did you sign up for a free trial of something but kept forgetting to cancel after you started getting charged? How about that gym membership you haven't used in six months? This is a great area to uncover extra funds.
Make a plan for your new found money
Once you've done a bit of financial tidying up, don't let your work go to waste. Decide how you'll apply that new found money to saving, investing, and paying off debt. It can be helpful to open a high-yield savings account to help your savings grow. If you don't need to access the money right away, a CD or MMA could be a great place to grow your balance.
Many experts recommend setting aside 20% of your income2 for saving and debt repayment. If you aren't exactly sure how to make that happen, or would like some guidance setting specific goals, talking to a financial professional can help.
Important disclosure information
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