10 Ways To Spring Clean Your Finances

Aaahhh I love spring! Birds chirping, flowers growing, and a great time to do some spring cleaning!

Time to get those old clothes donated, clean the house from top to bottom, put that ancient grill to the curb, and a great time to do a spot check of your finances.

Many people think of spring cleaning as a term only used for your house, but it should apply to you finances too.

Spring clean your finances

As the weather warms up, it’s a great time to start spring cleaning your finances and is also a good time to get your financial house in order.

Since May is mental health awareness month, now would be a great time to not only get your financial house in order, but to relieve your mental stress as well.

Why Do A Financial Checkup?

Springtime is the perfect opportunity to update your current routine and adopt new behaviors that will fit into your long-term financial lifestyle.

It’s a great time to improve your financial life by starting to think about ways to save money (especially with summer vacation right around the corner!), to streamline your spending, to declutter your life, and to just be your best self for the coming months ahead.

As I talked about here, the beginning of the year is the time to create your plan and initiate it. By spring, this is the time of the year to streamline that plan and to continue making positive financial changes in your life.

With enacting any plan, you need checkpoints along the journey to check progress and course correct if necessary. Your financial journey is no different.

Building wealth doesn’t just magically happen by wishing it will happen. To create the lifestyle you want and dream about takes some work, a little discipline, and a plan to make it happen.

Just like a clean house doesn’t happen by itself, your finances can drift into chaos and lethargy if not cleaned and well-maintained.

So, break out your financial broom & dustpan and let’s get to work to improve your financial situation. Let’s end the year better than it was started!

Here are 10 things you can do right now to give your finances a checkup.

De-Clutter Your Life

To get started, let’s literally clean out all of your old stuff.  In fact, you should be able to knock out several house cleaning and financial cleaning tasks all at once.

We all accumulate stuff. It fills our homes and leaves us constantly trying to shuffle messes around the house. We want to give the impression we have a clean home when in fact, it is a vain attempt at best. 

I know I live in it right now. For every mess we clean up, it seems my girls find new and improved ways to make another mess. We finally realized we had to stop shuffling messes and start decluttering. When in doubt, we threw it out.  Let’s just say so far, the girls haven’t yet missed what was cleaned up! 😊

Your finances are no different. My suggestion if you haven’t done already is to go through your house and clean out all the junk you haven’t used or missed in at least a year. Go through it all. Every room, closet, shelf, and the dark recesses of your basement.

Separate your outgoing items into 3 piles: sell, donate, and trash. You’d be surprised what people will buy. Don’t believe me? Search your favorite garage sale site on Facebook. Go search eBay or take a peek at Etsy. People will buy just about anything. There is market for just about anything from vintage dresses to old cell phones.

For example, you can use Decluttr to sell off electronics and video games.

You can use the spare cash from selling your old stuff for a bunch of different purposes that we will talk about later in this article.

Whatever you cannot sell, try to donate. There are several worthy charities to choose from.  Organizations accept all kinds of donations. You can donate clothes, electronics, furniture, appliances, cookware, etc. Nearly everything you cannot sell can be donated.

Make sure to keep your donation receipts in case you decide to claim it as a tax deduction this year. You’ll also need to itemize deductions come tax time.

Lastly, whatever is left over just get rid of it. You’ll thank yourself later.

After you have finished cleaning house, it’s time to tackle your stack of bills and statements in order to take financial inventory.

Take Financial Inventory

Let’s tackle that stack of receipts you have kept since 2010. I used to have that same stack too. I used to be a pack rat. Always saved every receipt and bank statement just in case I needed it someday.

Today, we have all our bills stored together in one place along with copies of our tax returns and receipts that were used to create it. We actually bought a 4-drawer filing cabinet to store it all.

I also store as many documents digitally as possible. I keep a backup of the hard drive locked away just in case something ever happens to the original. I have had WAY too many computers give me the blue screen of death to take any unnecessary chances with the years of hard work and data that I have accumulated.

You can also store your data to the digital cloud as well. Making your hard copy files digital will make you get organized quickly and cut down on your clutter. For any documents you cannot bear to part with (i.e., wills, estate plans, etc.) store that in a fireproof safe.

Here are some rules of thumb for data storage that I picked up from my attorney and accountant. First off, keep your old tax returns for the past 7 years in case you are audited. My accountant also has backups just in case something unforeseen happens such as a house fire.

Keep bank statements and utility bills for no longer than 1 year.  Same with credit card statements. Keep it simple.

Lastly, any documents left over don’t just throw out. Instead shred the documents. Take it from a person who has been a victim of identity theft, it happens way more than you realize. Paper shredders are cheap, and you can purchase one for as little as $50. It is definitely worth the investment.

File storage isn’t the only way to take financial inventory. Let’s look at your spending habits and money management system too. This is a great time to try new spending habits such as a new budgeting system, use cash instead of a credit card to purchase things, and maybe even explore going totally paperless.

If you haven’t done it already, explore automating your savings directly from your paycheck and using cash apps to keep a balanced budget. There is a ton of ways to streamline things so go give it a try and see what works for you.

Clean Up The Budget

If you haven’t already, now is the time to start one. Budgets don’t have to be limiting. In fact, budgets are all about your priorities. A good budget assigns a purpose to all your money so that your money works for you and not the other way around.

Now is a great time to reframe how you look at budgeting. Instead of thinking in terms of sacrifice, think in terms of prioritization, choice, and intentional design. Use budgeting to live the life you have always dreamed about. It’s the enabler to a better, happier life.

Spring cleaning your finances-2

If you have a budget setup, now is a great time to check it over and compare it to what was created. Is all the money accounted for? Are you still using credit cards to offset your lifestyle? Now is the time to clean things up.

The next thing to do is find any money leaks and plug them. We all have money leaks of various shapes and sizes. That gym membership you haven’t used since 2015. That Audible subscription where you haven’t purchased a book in over a year. Do you get a big tax refund? Maybe it’s time to adjust your tax withholdings to put cash in your pocket instead of Uncle Sam’s pocket. The possibilities are endless.

Lastly, now is the time to decide how to use all that money you found from selling all your old stuff. Want to payoff some credit card debt? Could your emergency fund use a pick me up? Ever thought about starting a 529 plan for you kids? Now is the time to make it happen.  

Check Your Credit Score

Credit bureaus make mistakes all the time. In fact, the Consume Financial Protection Bureau states that 1 in 5 Americans, about 20%, have an error on their credit report. Luckily you can check your credit report and correct those errors.

You are entitled to check your credit report for free once a year from each of the 3 credit bureaus. If you stagger them so that you ping 1 bureau every 4 months, you can continuously check your credit report for free.

On top of that, some budgeting apps like Mint also allow you to check your credit report for free.

Once the errors are fixed, consider signing up for a free credit monitoring service like Credit Karma. They not only keep you posted about credit score changes, but also alert you if they notice suspicious patterns that might indicate identity theft.

Mistakes can drag down your score and prevent you from getting a loan. A poor credit score can cause you to pay a high interest rate. Dispute any erroneous or fraudulent activity that is found.

Build Up The Emergency Fund

Like I talked about here, I call an emergency fund my “peace of mind fund”. An emergency fund is a set amount of cash that you can set aside if an unexpected event occurs.

When I have enough cash in my emergency fund, it eases my anxiety. Having enough funds on hand lets me be my best self because I do not have to worry what might happen if I was caught with my proverbial pants down. It’s happened to me before.

When getting your finances organized, a crucial step towards success is ensuring that your emergency fund is fully funded. An emergency fund is used if a catastrophic event occurs in your life such as job loss, a major car or home repair, an unexpected death, or other crisis occurs.

3-6 months of expenses saved in a separate bank account is a good rule of thumb if single or a dual-income household. If a single income household, it’s better to have 9-12 months on hand. I remember back in 2008 people that I knew were unemployed a year or more. Some had an adequate emergency fund and others didn’t. Those that didn’t’ were forced to move back in with their parents just to get by.

By having funds set aside, you’ll be able to recover quicker and get back on your feet faster than without it.

Automate Savings

Once you’ve figured out your budget, cleaned out all the clutter in your house, and plugged all your money leaks, now might be a good time to put more money toward savings.

When savings is automated, you can use the extra money for a variety of things such as building up the emergency fund, saving for a vacation or saving for a down payment on a newer car without even thinking about it!

Decide how much you want to save and set up a direct transfer from your paycheck to your savings account. Most companies allow you to divert your pay into more than 1 account so take full advantage of it.

In fact, you could take it even 1 step further by diverting some money into your checking account to pay everyday expenses, some money into a high yield savings account to prop up your emergency fund, and even divert other money into a brokerage account for investing.

Automating good behaviors to happen without you thinking about it will ensure it does happen on a regular basis. It takes the temptation out of the spending, is a great way to trick your brain into saving more, and you’ll learn to be more efficient with the money you have on hand to spend.

Assess The Road To Retirement

Next thing you need to focus on once your everyday finances are in order is to look to the future towards retirement.

If you haven’t delved into the world of investing, then now is the time. To start investing, the best way to get on track is to take full advantage of the 401K your employer provides. It’s easy to setup and easy to start learning. Index funds are a no-brainer way to pick the funds to invest in.

The key things to look for and are available in the details of each index fund is the following:

  • Percentage of fees charged: lower the better. IMO don’t pay any more than 0.20%. In fact, you should be able to find a nice mix of index funds that charge 0.10% in fees or less
  • Allocation: Pick a range of index funds that cover the breadth of company sizes
  • Morningstar Rating: More and more index funds are being provided with a Morningstar rating. Don’t pick any index fund lower than 4 stars.

If already investing, then good for you! Instead let’s use this time to give your retirement funds a checkup and to measure your progress.

Saving for retirement isn’t something you set and forget. You occasionally must check in to reassess your plans and make sure your investments are on track.

First, let’s look at your contributions.

A good goal to shoot for is saving 10-15% of your income. This also includes any matching contributions by your employer. If saving less than this or starting later in life, a target to shoot for is to have at least 3 times your average annual income saved for retirement by 40 and 4 times your salary by 50.

If you are not on track that is ok. This is why we do annual checkups.

If not on track, try to see if you can free up more cash to invest in your retirement and speed your journey to financial independence.

Another thing you can do to speed up your journey is to automate your investments. Most people are not fascinated with researching and picking stocks. They just want to do basic research, set it, and forget about it until it is time to do your annual checkup.

Check out using robo-advisors to assist you in investing in your 401K. There are also a couple of great and free retirement management tools you can use: Personal Capital and Financial Engines.

These tools do a lot of the heavy lifting for you, can assess if you are on track to meet your goals, and even offer suggestions to improve the outcomes.

The last thing to look at during your spring cleaning is your asset allocation. This is the type of investment you have purchased and assessing if the risk tolerances match your personal preferences.

Your asset allocation will change over time. When younger and just starting out, you have more time to take risks and a heavy mix of stock investment make sense. You have time to ride the ups and downs of the market to maximize the benefits to your portfolio.

As you get older and closer to the end of your journey, the focus changes from growing your portfolio to preserving your wealth. Therefore, your asset allocation needs to change over time.

If you don’t want to bother with this, using the robo-advisors I mentioned above to setup the proper allocation for you automatically. The choice is yours.

Me? I like to do the maintenance. However, that is not for everybody. Whatever you decide to do, the important point is to give your retirement a checkup at least 1-2X per year.

Find Cheaper Insurance

When was the last time you checked your car insurance rates? Insurance premiums tend to increase over time. Very few car insurance companies give your credit for being with them for an extended period.

On the other hand, most car insurance companies tend to give out great introductory rates to entice you to sign with them. It’s not uncommon to save 10 -20% on car insurance just by switching companies.

Have you hit a milestone birthday recently? It would also be a great time to ask your current insurance company to lower your premiums.

Lastly, now would be a great time to also check out your homeowners insurance and investigate if an umbrella insurance policy is right for you.

Not only is it a great time to look for cheaper rates, but it is also a great time to confirm if you have enough coverage. Remember, the best offense is a good defense and insurance coverage is all about defense against life’s mishaps.

Plus, if you purchase your car, home, and umbrella insurance policies with the same insurance company, they will give you a multi-policy discount….. nice! 😊

Track Your Net Worth

Your net worth is the value of all your assets minus your liabilities. Keeping track of your net worth is a good way to track your financial health.

While its possible to get too fond of looking at your financial figures, most Americans do not seem to have that problem. In fact, the problem they have is that they do not pay enough attention to their net worth.

Track Your Net Worth

There is an old saying, “that which gets measured gets done”. This means you should figure out what is important to track and then track it regularly. Your net worth should be one of those indicators.

There are several ways to track net worth. You can do it yourself using a simple spreadsheet. Many budgeting apps like Personal Capital also track it for you.

Another thing you need to consider tracking is cashflow. Cashflow simply put is the amount of passive income your investments bring in each month. The end goal is to generate enough passive income to cover your monthly expenses. Once you achieve that, you have just achieved financial independence!

Final Thoughts

Both a clean home and clean finances don’t happen my mistake or serendipity. It only happens when you go out and make it happen.

Over time, both your needs and goals change. It’s commonplace and part of the process. Set aside some time this spring to review your finances and tweak them as deemed necessary.

Our financial life changed once I realized this and have never gone back. By taking the 10 steps I listed above, you can steer your life to the direction you want it to go. It sure beats the alternative of drifting aimlessly hoping good things come your way.

Make it happen today!

Live The Life You Love, Want, And Deserve!