Spring cleaning means a lot for your home — tidying up your living space, scrubbing the bathroom, wiping down counters, and generally making sure your place is squeaky clean. But the new season also means it's time to tidy up other areas of your life, and there's no better time than now to start spring cleaning your finances. All things considered, the condition of your bank account should take precedence over the state of your bathroom, so if you're making time to spiff up your household, take the time to make sure your financial life is at its best too.
Just as you give your apartment a one-over before pulling out the cleaning equipment, take on your finances with a solid plan. Begin by reviewing your spending and finding room for improvement, then set up a reasonable budget that gets you on the right track. Everything in your home has its place, so organize your financial accounts in a way that makes them easy to manage and maintain so you're always in full control of where your money is and what it's doing. Once the fundamentals are straightened out, consider what is necessary to set you up for a healthy financial future — auditing what you own, eliminating temptations, and saving for retirement.
While the warming weather and increasing sunshine aren't necessarily conducive to staying inside and straightening out your finances, you'll thank yourself later. It's still early enough to make this the year you finally financially adulted — paying off loans, improving your credit, and setting yourself up for a secure financial future. The earlier you break bad habits and begin taking control of your finances, the better off you'll be later, and your bank account and future self will thank you.
1. Review Your Spending
First things first: take a long hard look at your spending habits. Go over your credit card statements and bills from the past few months and figure out exactly where your money is going. There are apps like Mint that can help provide a big picture by consolidating all your accounts in once place.
While reviewing your financial records, ask yourself the following. Exactly how much does it cost for you to live? Does your breakdown make sense for your needs? Are there problem spending areas? Mint can help categorize your spending to tell you exactly what categories are eating up your money, like "restaurants," "clothing," or "alcohol and bars." If you want to take a more old school approach, take some colored highlighters to your credit card statements and mark transactions in three categories: necessities (groceries, toiletries, utilities, etc.), wants (like your New Yorker subscription), and things you could live without (a round of drinks at happy hour or that four dollar frappé).
2. Cut Back On Frivolous Spending
The exercise above will be eye-opening — you'll immediately be alerted to areas of your spending that could be reeled in. Chances are, you'll be surprised by just how much you spend on stuff you don't actually want or need. Determine which costs are bringing you the least amount of satisfaction and benefit and then cut them out. Additionally, knowing just how much it takes to cover the basics will give you a better sense of how much you're able to put away each month if you cut back on frivolous spending.
Are you still subscribed to memberships or magazines you no longer use or read? Cut them out of your life. Do you see redundancy with where your money is going? Do you see a recurring payment for something you forgot you had altogether, or don't remember ever signing up for? Be thankful you caught it now, because that $9.99 each month adds up.
Once you've successfully cut back on superfluous spending, see just how much of your paycheck can go unspent each month without stopping your world. Then, decide to take a similar percentage of your paycheck and put it aside. You can start small, at around five percent, then slowly build as you grow comfortable and realize you don't even miss it. You worked hard for your money, so feel good about holding on to it.
3. Create A Budget
After you've familiarized yourself with exactly where your money goes and just how much it costs to live, take the time to sit down and draw up a new budget. Eliminate unnecessary costs where you can, and estimate just how much you need to put towards necessities each month. This will prevent you from overspending and consequently missing payments on the things that matter.
The goal of your budget is to maximize your savings, improve your credit by never missing payments, while also letting you live comfortably (within your means) and able to enjoy the money you earn. Your budget will also provide financial clarity, and allow you to set up and live by goals each month. Have a vacation you're saving up for? Adjust your budget to cut back more on the non-necessities and put away more for that plane ticket. In addition to planning for short-term goals, you should be updating your budget with any major life change, like a promotion, a new job, or a new apartment. Just be sure you're not tweaking your budget constantly to allow for nonproductive spending, like a new pair of shoes you're obsessing over but can totally live without.
When you have your budget in place, you can see how well you're sticking to it. Have you been able to completely cut down on impulse buys now that you're more mindful of your money? Congrats! Now, put that money straight toward one of your necessities or, if you have room, aside for savings. Do you notice you keep overspending on dining out? Make a conscious effort to hit up the grocery store and cook for yourself when you can, and maybe toss a few of those takeout menus. Just being aware of your spending habits gives you the power to have better control. You'll know just how much of your paycheck needs to be going to the things that count, so you'll be less apt to blow it on the stuff you don't need. Having a budget will not only help you break your bad habits, but will also allow you to wisely reward yourself when you can.
4. Get Organized
Before you can find yourself on the path to financial success, you need to be organized. While you should also be considering the bigger picture, you can start with your wallet. Is it overflowing with crumpled receipts, wads of dollar bills, gift cards that have gone unused, and change too small to make its way into another transaction? Get into the spring cleaning spirit by doing somewhat of a detox to your wallet and getting the everyday embodiment of your financial life in tiptop shape. Addressing the disarray of your wallet will instantly make an impact on your day to day life, and you'll be surprised by just how much extra money is lying around unused, because it's wedged in pockets of your wallet or handbag or just sitting there as spare change. TD Bank and PNC both offer coin counting machines to customers free of charge (and charge non-customers a nominal fee) so turn your chunk of change into cash you can actually put toward something.
Next, tackle the bigger financial clutter in your life. Do you have mounds of documents from prior bills or a drawer full of old receipts? Go through everything, organize, and shred what you no longer need. The federal government advises that you only need to keep bank statements for a year, so if you have any older than that, feel free to shred away. If you've decided not to go paperless (though it is highly advised you should, see below) then make sure you have organized files for storing your physical documents. Once your wallet is clean and you have a system for filing away those incoming papers, maintain the order along the way.
5. Go Paperless
While you're rearranging your financial documents and reassessing your accounts, opt to go paperless. Not only will it do good for the environment, but having everything filed and digitally accessible will keep you more organized. Most accounts offer paperless billing options, whether it's your checking accounts, credit cards, student loans, or utilities. Chances are you have to log in to pay these bills anyway, so forgo the step of receiving the bill in the mail. While you're at it, set up automatic bill payments, considering it's a regularly occurring amount (like rent or internet, not your credit card or phone bill which fluctuates). This will keep you from facing late fees and hurting your credit, so long as you stay on top of it to make sure the funds are there.
Tax records should be saved for seven years, but everything else can be photographed or scanned, then sent up into the cloud. It's much easier to have all your important documents and accounts available for view right on your phone or computer than strewn around your apartment. You won't have to ever worry about losing or damaging important paperwork, and your accounts will be accessible from anywhere.
6. Tally Up Your Rewards
A big benefit of staying organized is making sure you can reap the rewards from your financial life — including credit card points, frequent flyer miles, and that stack of unused gift cards you just found in your wallet. Many rewards and gift cards have expiration dates, so stay on top of them to make sure you're never missing out. If you find yourself with unused gift cards you still don't plan on using, use a site like Gift Card Granny to resell them.
While you're spring cleaning your finances, look over your rewards programs and loyalty club memberships. If you have to pay a fee to participate, calculate whether what you end up spending is offset by the value of the rewards. If it is, be sure to use them.
7. Set Up A Retirement Account
It's never too early to start thinking about the future. While it's easier (and decidedly more exciting) to focus on short-term goals than saving for your retirement, even putting aside just a little each month now will make a huge difference later on when it counts. Just this year, at age 27, I opened up a Roth IRA, but I really should have done so three years ago. Do some research about your retirement plan choices. In addition to or instead of a Roth IRA, you can contribute to your company's 401(k) if they offer one. Make your savings contributions automatic, so earnings are moved from your paycheck to your savings before you even see them.
8. Sell Or Donate Your Unwanted Things
This step of spring cleaning your finances goes hand in hand with your regular old spring cleaning. Your money is in your bank account but it's also in the things you own. How can you curb your spending habits if you can't even keep track of the assets (or at least clothes and cooking supplies) you already have?
When you're taking care of spring cleaning duties in your home this year, do a full audit of what you already own. As you go through your belongings, pull aside things you no longer want or need. Then, assess the condition of the items — are they usable? Are they sellable? Are they long past their prime? Then choose to either donate, resell, or recycle. When donating to a charity, do you homework first and be sure to follow IRS guidelines for valuation purposes. If you're reselling, use sites and apps like eBay, Decluttr, or Poshmark, depending on what it is you're offering. Easily track down a recycling collection point near you with the iRecycle app.
This exercise will not only clear up some space in your home while earning you some cash, it will also put into perspective just how much you already have and what a pain it is to get rid of what you no longer want, keeping you more savvy when confronted with possible future purchases.
9. Remove Temptations
As you journey into your new, spring cleaned financial life, make sure you set yourself up for success. Remove temptations from your life that urge you to spend your money on non-necessities. You can't avoid the candy bars and gum packs that flank the aisle just before check-out at the grocery store, but you can control the other impulse buy instigators.
Unsubscribe from retailer emails that are constantly bombarding your inbox with offers of free shipping or 20 percent off. Use the app Unroll.Me to streamline the process. If you know you can't go into a certain store without walking away with a new purchase, avoid the store altogether. Don't use shopping, or online retailer browsing, to kill time. Enter stores and visit sites with purpose and the intention to buy something specific. Keep a spending diary if it helps to reign in your impulse buys. Challenge yourself with a day of not spending. Pack your lunch, fill up your gas tank or subway card, and stock up on groceries beforehand. Then see if you can get through a full 24 hours without once swiping your card or pulling out any cash. It will be a fun experiment and give you further insight into just how many temptations are constantly testing us.
10. Plan Ahead
Now that you've cleaned up your financial life, make sure you stay on top of it as you continue into the year. Create your own financial calendar to manage everything as you go. It will keep you from missing deadlines and racking up late fees, and will also save you from the headache of stumbling to get organized at the last minute (like when it comes time to do your taxes). Set up reminders to pay off bills, review accounts, and adjust your budget. It's suggested that you take one day each week to review your financial situation, meaning cleaning out your wallet, organizing receipts, and checking your bank accounts. You should be reviewing credit card statements regularly, just to be sure there are no questionable charges, and you can cut out the work by using your credit card or bank's app to program alerts directly to your phone.
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