A Simple Guide to Spring-Cleaning Your Finances
Spring cleaning can be more than vacuuming behind your furniture and bagging old clothes and shoes to drop in the donation bin. It’s also the “perfect time to sort through financial paperwork, review bills…and assess whether your financial habits reflect your bigger goals,” according to a recent article in U.S. News & World Report.
U.S. News talked to several financial experts to get their best advice on spring cleaning your finances. Here are a few tips to give you a fresh outlook on managing your finances and meeting your savings goals:
1. Organize financials and go digital. Can’t find last February’s mortgage statement? Your past-due water bill? Regina Leeds, author of “Rightsize…Right Now! The 8-Week Plan to Organize, Declutter, and Make Any Move Stress-Free,” advises sorting through clutter to file or store what you’ll need — and tossing the rest. Storing documents digitally, using the cloud or a thumb drive, eliminates excess paper files and folders. (If you store financial records on your computer, be sure to do regular back-ups.)
2. Take charge of your spending. “Look at your budget and spending habits as a project that requires ongoing monitoring and occasional adjustments,” Chantel Bonneau, a financial advisor with Northwestern Mutual, told Daily Worth. “Hold yourself accountable with an app, a journal, an accountability partner — whatever works to keep you on track,” she says. With free money management apps like Mint and Manilla, you can evaluate your daily spending and set budget goals and bill-pay reminders.
3. Lower interest rates and payments. CreditCards.com research shows that while relatively few ask, two out of three cardholders who ask for a lower rate get it. Plus, since you now know where your money is going (see #2), you may notice bills that you could ask the provider to lower, such as your cable/internet provider, cell phone company, or gym membership. Keosha Burns, 31, of Washington, DC, who works in the communications department at Fannie Mae (publisher of The Home Story), recently called her cable/Internet provider and they agreed to lower her bill $50 a month ⎯ for the same service.
4. Set up and save. Whether you’re tracking your spending with an app or on paper, or some combination, it’s a good idea to have a short-term savings account too so you can save money for paying bills and such, says Burns. She also has a long-term savings account that’s NOT linked to her checking account (to eliminate the temptation to move money for spending). With each paycheck, a small amount is automatically deposited to her long-term account, she says.
5. Increase 401(k) and IRA contributions. For 2015, the limit for contributions to traditional and Roth IRAs is $5,500 (with an additional $1,000 allowed if you are age 50 or over). Russell A. Ekanger, a CPA in Falls Church, VA, suggests maxing out any “matching” program offered by your employer for your 401(k) savings and putting “as much as possible” toward Roth IRAs. “That way your money can grow tax-free,” he says. If your employer does not have a 401(k) plan, and if you are eligible and your income level allows, he suggests contributing as much to the Roth as possible and putting as much as you can into a regular IRA as well. “It’s a good vehicle for savings, but remember that the money has to be left in there to work for you.”
For more tips, check out the complete article.
Source: “Your Step-by-Step Financial Spring Cleaning Guide,” U.S. News & World Report, by Kimberly Palmer, April 1, 2015