3 Ways to Spring Clean Your Finances

Our homes aren’t the only things that could use some airing out and a good polish in the spring – your finances deserve some TLC, too! But how do you practically work on your finances with a spring clean? You don’t need to reinvent the wheel; you may just want to dust off your current process. While there are so many great ways to focus on your finances, we’re suggesting three tips to get started with yours:

1. Organize Debt
2. Check Up on Spending
3. Make Adjustments

1. Organize Debt

Checking in on your debt isn’t always fun, but it’s so important to remain aware of how your repayments are tracking. Take stock of these three areas:

• How much you still owe
• What you’re actually paying towards your debt (principal)
• Your goals to pay debt down

This is a great practice to do once or twice a year. Here is a list of common debts that are good ones to check up on:

• Home Mortgage
• Car Payment(s)
• Credit Card Balance(s)
• Student Loan(s)
• Medical Bills

When looking at each of these accounts, get out the statements and documents or log on to your account profile and record where you are with all of them. You might start a journal with the date and write the name of the account with how much is owed and what you’re paying. Use this time to reorganize.

If you don’t have a system, there’s no better time to start! Get a few inexpensive folders, paper clips, and a notebook or journal. If you prefer digital methods, you can use a budgeting form or resource as well as a free app to help you organize all that information online. You might also try a hybrid of paper and digital organization, such as printing documents or taking screen shots and emailing them to yourself so you can have those all in a debt folder.

Next, be sure to look out for how much you’re paying towards principal and interest. Knowing the amount of money you’re paying toward the principal balance (loan amount without interest added) can inspire you to adjust your payments to knock off some interest accrual (build up) in the future. One great example of why checkups are helpful is the federal student loan forbearance. This has been going on since early in the COVID-19 pandemic. It is possible that people who had automatic payments for their student loans may have been unaware and thought they were paying towards their principal balance, but with the federal forbearance from the government, auto payments were paused on eligible student loans.

Lastly, after being updated on your debts, you can create new goals for repayment. It will highlight where you could pay more, or help you realize if you want to pay something off within a specific time frame. It may even reveal an account issue or inefficient payment you can correct to get things back on track. We’ll pick this subject back up when we cover making adjustments below.

2. Spending Checkup

Ah, the spending checkup! It’s probably another unwelcomed task, but bear with me, a checkup can be helpful! Don’t go into this being hard on yourself. Everyone spends money. We’re doing this so we can remain aware and learn where our money goes. You could find that your spending all goes to necessary places and no adjustments are needed. However, you could see where you want to reduce amounts or start spending more in another category.

If you’re wondering where to start, it’s simple: pull up your bank/credit union accounts and go through your withdrawals. How far back you go is up to you. You might start with six months, as a whole year could be overwhelming depending on your spending and how many people are on the account. Take note of the three places or items you spend the most towards. Then you can go through and evaluate if that’s where you want the bulk of your money to go, or if you want to reallocate and make any adjustments that fit better for you.

As an example, my spending checkups typically reveal to me that I spend the bulk of my money on food. This isn’t too earth shattering as everyone must eat. But being a foodie and in the car a lot, a bulk of that spending is on take out or a restaurant drive through. Staying updated on my spending habits has helped me start planning my lunches for work, grocery shopping smarter, and overall being aware that I’d like to reduce the amount of my money that goes towards fast food.

Mostly, it’s important to try to keep an objective view on your spending checkups. You may be very financially aware, and this is just routine, or you may be surprised or even discouraged by what you find. But the point isn’t to dwell on either, it’s to take stock and use your understanding of your spending to make specific goals for better outcomes for yourself and your loved ones. You’ve got this!

3. Make Adjustments

You’ve made it through the bulk of this spring clean and things are starting to look fresh! Now that we’ve done the hard work of evaluating our debts and spending, it’s time to take what we learned and use it to help our future finances.

Making adjustments is really dependent on your individual or household results and what your situation looks like. It’s not one size fits all. The important thing with finances is to make goals that work for you. Let’s give some examples to get you thinking in a helpful direction.

If the interest rate on your car payment is especially painful to look at and you’ve got the room in your budget, you might add an extra amount to your monthly payment. Paying over your required amount can cut interest and the time it takes to pay off the loan. You may even want to focus on the bigger picture and choose a strategy for all your debt repayment. Whether you want to shave the interest or pay down certain accounts so you have fewer to focus on, find your direction and go for it.

Now it’s your turn to dial in on what you can and would like to change. Keep it realistic and attainable, and don’t overwhelm yourself. Add a spring cleaning to your financial toolbelt this year and you’ll be on your way to a better understanding and more specific goal setting before you know it.