The spring season can encourage us all to “clean up” various aspects of our lives – including our finances. Devoting some time to your financial wellbeing can help you avoid overspending, establish an effective household budget, and ultimately reach your savings goals.
Here are some actionable ways you can help get your finances organized:
1. Go through your billing statements and get rid of old ones.
Having too many bills or important documents in various places can be overwhelming and can make it difficult to find something when you need it. Rifling through hundreds of paper documents can cause frustration and take up valuable time.
If you haven’t already switched to electronic bills and eStatements, you might consider doing so. Not only does this help cut down on paper waste, but having your bills and financial statements in an electronic format allows you to organize them easily on your computer.
As for all of the paper documents you do have, try to separate them into dedicated folders or envelopes to better organize them. This could be as simple as having folders for “important” and “archived” documents or having separate folders for each bill or document type.
How long to retain your documents largely depends on what they are for. Generally, you should aim to keep your records as follows:
- Up to 3 Years: household utility bills, phone and cable bills, expired insurance policies, pay stubs
- Up to 7 Years: tax returns, income and expense records, credit card and bank statements, brokerage house statements, paid-off loan documents, personal property sales receipts
- Long-Term: tax-dispute records, retirement plan documents, investment records, medical records, social security information, insurance claim documents
Getting rid of what you don’t need can help you better organize your critical documents and allow you to see a more accurate picture of your current finances. Keep in mind that anything with your personal information printed on it should be shredded before disposal to prevent identity theft or other kinds of fraud.
2. Review all of your regular bills.
Once you have pared down the number of documents you have on hand, you should review your recent and recurring bills to be sure there are no suspicious transactions, and that you have not missed any due dates. If you find you have neglected to pay something, create a plan to make it right and get back on schedule so you do not end up owing more in fees or interest. Missed payments can also wreak havoc on your credit score, so you should definitely put a plan in place to ensure on-time payments.
3. Review your spending and income.
Once you have gone through your financial documents and looked at the bills you’re regularly paying, the next step is to review your spending habits. Consider what you are currently spending money on, and then determine if it’s still a worthwhile investment.
If you find you have more money going out than you have coming in, you should consider making some changes to either cut back on your expenses or supplement your budget with additional income. As you’re tabulating all of your essential expenses, you should earmark “savings” as one such expense. You should aim to save at least something each month in order to reach your financial goals.
4. Refresh your budget.
Not all people utilize a strict budget, but having some sort of outline can be helpful for you to better understand what you can afford to spend, and ensure that you have room for saving every month. Spring cleaning can include creating a basic budget , or utilizing budgeting apps to help streamline the process.
When establishing a budget, you should designate funds for your specific savings goals – whether that be depositing regular amounts into a general savings account, or putting money aside for specific things like a vacation, a home, your retirement or a wedding. If you don’t consider all of your savings goals during the budgeting process, it can be nearly impossible to reach them. And don’t forget to keep room in your budget for an emergency fund as well.
Staying ahead of your finances and budget can help ensure you are on the right track financially. No one likes being faced with a financial emergency or unplanned expenses, but by planning proactively you can help weather whatever life throws at you.