Sentry Page Protection
Spring Cleaning Your Finances
Spring is the perfect time to clean up your life. Most of us already spend some time each year doing spring-cleaning but make the mistake of limiting it to the physical clutter in our lives. Have you ever considered spring-cleaning your finances? We all accumulate financial clutter that needs to be dealt with if we want to keep our finances in good condition and spring is the perfect time to give your finances a tidy-up.
Financial challenges are one of the most stressful aspects of life. Finding happiness is challenging when your finances are a mess. So this spring, take advantage of the strategies I'll be sharing over the next three months (it is a spring clean after all and will take time) and put your finances back on track. You’ll be delighted when you discover the results!
Most of us have a less than spectacular filing system, so let’s start there.
Financial challenges are one of the most stressful aspects of life. Finding happiness is challenging when your finances are a mess. So this spring, take advantage of the strategies I'll be sharing over the next three months (it is a spring clean after all and will take time) and put your finances back on track. You’ll be delighted when you discover the results!
Most of us have a less than spectacular filing system, so let’s start there.
“Part of your heritage in this society
is the opportunity to become
financially independent.”
~~Jim Rohn~~
is the opportunity to become
financially independent.”
~~Jim Rohn~~
Spring Cleaning Task 1: Develop and Maintain a Filing System
If you want your spring-cleaning to be easy, the key is to not make a mess in the first place. Your finances aren’t any different. Everything is easier if you maintain good records and have an intelligent system to keep everything organized.
Consider the following simple, but effective, system:
1. Minimise before you file. Everything doesn’t need to be kept and filed. Decide what is important to save and what can be tossed. Before throwing documents away, shred any that contain account information or your social security number. Or wet them and put them in the compost bin.
2. A simple alphabetical filing system works well. One drawer of hanging file folders or a large ring binder with alphabetical tabs is sufficient for most of us.
3. File things immediately! One of the busiest women I know is also the most organised. She runs a very busy veterinary practice and has a family of 11 to look after. Her advice is "handle it once". When a bill or statement comes in, she opens it, deals with it then and there and files what needs to be kept. So avoid creating a pile that sits for an extended period of time. Eventually the pile starts to get intimidating, and you’ll procrastinate instead of dealing with it. Items also tend to get lost the longer they sit.
4. Consider keeping your documents online. Many of your financial records are probably already available online. It may be unnecessary to print them all out. It’s time consuming and expensive and takes up space. You might want to consider scanning your documents and keeping everything online. Just remember to back up your data religiously.
You can develop your filing system as you work through the rest of your financial spring-cleaning. Since spring-cleaning involves putting things in the proper places, it’s the perfect time to develop a filing system that works for you.
Spring Cleaning Task 2: Evaluate Your Spending
Getting an accurate picture of your spending is very important. The money that you have left after paying your bills serves as the seed from which everything else grows.
Without extra money left over at the end of the month, you simply have nothing to save or invest. If you have nothing to save or invest, it’s difficult to deal with life’s inevitable financial challenges, plan for your retirement, or leave anything to your heirs.
Get started by following these steps:
1. Record every cent you spend for the next 30 days. This might seem like overkill, but most people are surprised by how much they spend on the little things over the course of a month. It’s the coffee, magazines, lunches, and chocolates at the service station that can really add up. That money could probably be better spent elsewhere.
2. Develop a tracking system that you can follow regularly. It’s important to capture 100% of your spending.
‣ Some people elect to pay for everything with a debit card and then rely on banking records. This will account for every penny, but it’s challenging to know exactly what the money was spent on. Ensure you can break the spending down into different categories.
‣ The most reliable method when tracking your spending is to keep every receipt and enter the results into a notebook or spreadsheet at the end of each day. These days your phone can be used to track your spending, no need for pen and paper or starting up the computer. And you can make notes as you go, so you won't be relying on your memory or needing to find time to record your spending later on.
3. Categorise your budget. Knowing exactly how your money is spent can be just as important as where it’s spent. Consider the following budget categories when tracking your spending:
‣ Charitable donations
‣ Food (divide the total amounts spent at the supermarket and in restaurants)
‣ Pet expenses (break out food, vet care, and other expenses)
‣ Mortgage or rent
‣ Property taxes for the month
‣ Household enhancements or repairs
‣ Homeowners Association (HOA) dues (if any)
‣ Utilities (such as electric, water, gas, home phone, cell phone, internet, cable, and garbage)
‣ Clothing
‣ Gas for your car
‣ Any other automobile expenses
‣ Any monthly recurring bills such as car payments, credit cards, and other loans
‣ Medical care: separate into doctor, dentist, medications, and medical device expenses
‣ Insurance: differentiate the various types
‣ Household supplies: detergent, toiletries, paper towels, tools, and other items
‣ Items for school
‣ Personal items: haircut, gym membership, cosmetics, magazine subscriptions
‣ Child care
‣ Child support or alimony
‣ Savings
‣ Investments
‣ Retirement
‣ Entertainment
‣ Any other expenses that aren’t mentioned on this list
These categories provide an excellent overview of how your money is being spent each month. Make it a habit to record your spending regularly, so you have an accurate picture at the end of the month.
4. Evaluate your spending. After keeping careful records for a month, you might be surprised at where you’re spending your money. Do you see any areas that stand out as being excessive? Where can you cut back and how can you put that money to better use?
‣ The common areas that can get out of hand include: Groceries, eating out, entertainment, clothing, and personal items. Think about ways you can reduce these costs.
‣ Minimizing or eliminating your car payment and moving to a less expensive home can result in big savings.
Controlling expenses is important for everyone. The less money you’re spending each month, the more money you’ll have for saving and investing.
The other primary drain on your finances is most likely debt.
Spring Cleaning Task Step 3: Review Your Debt
Debt is a real financial challenge. It’s like trying to run a marathon uphill.
Sit down and look over all of your debt. Develop a reasonable plan that will eliminate it as quickly as possible. Most importantly, develop habits that prevent your debt from growing larger. Just think about all the extra money you’d have each month if you were completely debt-free!
Next month: Spring Clean Your Finances Steps 4 - 7
If you want your spring-cleaning to be easy, the key is to not make a mess in the first place. Your finances aren’t any different. Everything is easier if you maintain good records and have an intelligent system to keep everything organized.
Consider the following simple, but effective, system:
1. Minimise before you file. Everything doesn’t need to be kept and filed. Decide what is important to save and what can be tossed. Before throwing documents away, shred any that contain account information or your social security number. Or wet them and put them in the compost bin.
2. A simple alphabetical filing system works well. One drawer of hanging file folders or a large ring binder with alphabetical tabs is sufficient for most of us.
3. File things immediately! One of the busiest women I know is also the most organised. She runs a very busy veterinary practice and has a family of 11 to look after. Her advice is "handle it once". When a bill or statement comes in, she opens it, deals with it then and there and files what needs to be kept. So avoid creating a pile that sits for an extended period of time. Eventually the pile starts to get intimidating, and you’ll procrastinate instead of dealing with it. Items also tend to get lost the longer they sit.
4. Consider keeping your documents online. Many of your financial records are probably already available online. It may be unnecessary to print them all out. It’s time consuming and expensive and takes up space. You might want to consider scanning your documents and keeping everything online. Just remember to back up your data religiously.
You can develop your filing system as you work through the rest of your financial spring-cleaning. Since spring-cleaning involves putting things in the proper places, it’s the perfect time to develop a filing system that works for you.
Spring Cleaning Task 2: Evaluate Your Spending
Getting an accurate picture of your spending is very important. The money that you have left after paying your bills serves as the seed from which everything else grows.
Without extra money left over at the end of the month, you simply have nothing to save or invest. If you have nothing to save or invest, it’s difficult to deal with life’s inevitable financial challenges, plan for your retirement, or leave anything to your heirs.
Get started by following these steps:
1. Record every cent you spend for the next 30 days. This might seem like overkill, but most people are surprised by how much they spend on the little things over the course of a month. It’s the coffee, magazines, lunches, and chocolates at the service station that can really add up. That money could probably be better spent elsewhere.
2. Develop a tracking system that you can follow regularly. It’s important to capture 100% of your spending.
‣ Some people elect to pay for everything with a debit card and then rely on banking records. This will account for every penny, but it’s challenging to know exactly what the money was spent on. Ensure you can break the spending down into different categories.
‣ The most reliable method when tracking your spending is to keep every receipt and enter the results into a notebook or spreadsheet at the end of each day. These days your phone can be used to track your spending, no need for pen and paper or starting up the computer. And you can make notes as you go, so you won't be relying on your memory or needing to find time to record your spending later on.
3. Categorise your budget. Knowing exactly how your money is spent can be just as important as where it’s spent. Consider the following budget categories when tracking your spending:
‣ Charitable donations
‣ Food (divide the total amounts spent at the supermarket and in restaurants)
‣ Pet expenses (break out food, vet care, and other expenses)
‣ Mortgage or rent
‣ Property taxes for the month
‣ Household enhancements or repairs
‣ Homeowners Association (HOA) dues (if any)
‣ Utilities (such as electric, water, gas, home phone, cell phone, internet, cable, and garbage)
‣ Clothing
‣ Gas for your car
‣ Any other automobile expenses
‣ Any monthly recurring bills such as car payments, credit cards, and other loans
‣ Medical care: separate into doctor, dentist, medications, and medical device expenses
‣ Insurance: differentiate the various types
‣ Household supplies: detergent, toiletries, paper towels, tools, and other items
‣ Items for school
‣ Personal items: haircut, gym membership, cosmetics, magazine subscriptions
‣ Child care
‣ Child support or alimony
‣ Savings
‣ Investments
‣ Retirement
‣ Entertainment
‣ Any other expenses that aren’t mentioned on this list
These categories provide an excellent overview of how your money is being spent each month. Make it a habit to record your spending regularly, so you have an accurate picture at the end of the month.
4. Evaluate your spending. After keeping careful records for a month, you might be surprised at where you’re spending your money. Do you see any areas that stand out as being excessive? Where can you cut back and how can you put that money to better use?
‣ The common areas that can get out of hand include: Groceries, eating out, entertainment, clothing, and personal items. Think about ways you can reduce these costs.
‣ Minimizing or eliminating your car payment and moving to a less expensive home can result in big savings.
Controlling expenses is important for everyone. The less money you’re spending each month, the more money you’ll have for saving and investing.
The other primary drain on your finances is most likely debt.
Spring Cleaning Task Step 3: Review Your Debt
Debt is a real financial challenge. It’s like trying to run a marathon uphill.
Sit down and look over all of your debt. Develop a reasonable plan that will eliminate it as quickly as possible. Most importantly, develop habits that prevent your debt from growing larger. Just think about all the extra money you’d have each month if you were completely debt-free!
Next month: Spring Clean Your Finances Steps 4 - 7