5 Things You Should Do to Spring Clean Your Finances
If the start of warm weather makes you instinctually reach for the feather duster and mop bucket, remember that your home isn’t the only area in your life in need of some tidying up. “Even if you feel like you’re on top of your finances, there are some things you should do once a year that are easy to overlook,” says Katie Waters, a Certified Financial Planner and founder of Stable Waters Financial. You can probably bang out this whole list in less than half a day—and start spring all spruced up.
1. AUTOMATE YOUR SAVINGS.
Call it an emergency fund or an "oh f*ck" fund or a rainy day fund—but whatever you call it, you need to have some savings socked away to cover unexpected expenses. “For most people, automating savings is the only way to make it happen,” says Taline Nikolopoulos, an associate with World Financial Group.
Open a separate savings account and talk to HR about depositing a portion of your paycheck directly into that account each pay period. Ten percent of your take-home pay is a noble goal, but if that feels ulcer-inducing try 5 percent at first. “You probably won’t even notice it’s gone,” says Nikolopoulos.
2. AUDIT YOUR BUDGET.
We know, audit and budget are just about the least fun words ever (well, aside from toilet and deep clean). But budgeting is the best way to reach pretty much any financial goal—and creating one doesn’t mean much if you’re not actually following it. “Some people think budgeting means making up numbers, but it’s really more about behavior,” says Waters. “If you write down $500 for groceries, because you think that’s what you should spend, but you’re actually spending $800, you’re not doing yourself any favors.”
To spring clean your budget, she recommends pulling out the last two or three months of bank statements, grabbing a calculator, and taking a look at which spending categories are in line with your monthly budget and which are radically off. “It’s easy to make excuses for why you went over this month, but when you’re looking at two or three months, you can see what’s truly a one-off and what’s a constant pattern,” she says. Rather than set unrealistic goals (Cut the restaurant budget in half! Take shopping down to $10!), she recommends trimming any splurgy categories by just $50 each month, so you can walk your Chipotle habit back more gradually (and be more likely to succeed).
3. RECONSIDER YOU SUBSCRIPTION.
From beauty products to meal kits, magazines to streaming music, the number of subscriptions most consumers juggle has exploded in recent years. And while $10 a month or $50 a year might not seem like much, when taken as a group they can make a serious dent in your wallet. Now is the time to consider how much use you’re getting out of Pandora or Birchbox or Stitchfix—and cancel any memberships that no longer seem worth it.
Rates for auto insurance and cable can also vary wildly from year to year, so comparison shop to see if now is the best time to make a switch (and save a bundle). Often just calling your cable or insurance company with news that a local friend is getting a better deal may be enough to get your rate lowered.
4. CLEAN UP YOUR PAPERWORK.
When it comes to bank statements, there’s no one-size-fits-all rule about whether electronic or paper statements are better, says Nikolopoulos. But if you’re in the habit of reviewing your statement online, take 10 seconds to opt out of mailed copies, to spare yourself the clutter of unopened mail. Then, everyone should take five minutes to create a system for making sure mail gets opened and dealt with quickly—say moving a waste bin into the foyer for envelopes and unimportant items and putting a tray on your desk for important mail that needs more attention each week.
“With finances, notices and statements can be time sensitive, so if you leave something too long, it can really cost you money,” says Waters. If you tend to scatter important files in random drawers, consolidate them into one spot and let your partner or best friend know where it’s stored.
5. SCRUTINIZE YOUR CREDIT REPORT.
Sure, pulling a copy of your full credit report and poring through every line is not the most thrilling way to spend an hour. But it’s the best way to spot and fix inaccuracies that could be tanking your credit score and may be holding you back from getting a great interest rate on the car loan or mortgage you might need in the future.
Reviewing your report could also help you spot identity theft in progress, like accounts in your name that you never opened. The Fair Credit Reporting Act requires that the major credit reporting companies (Equifax, Experian and TransUnion) give you with a free copy of your credit report every 12 months. Those companies have set up a free site, AnnualCreditReport.com, to make it even easier to get your hands on the goods. And if you do spot something fishy or inaccurate, contact the reporting agency in writing to get it fixed.