Building wealth is a lot like training for an athletic goal such as running a marathon or getting in shape for the summer. Your goal does not work unless you put some time and energy into it.
With every new season comes a unique chance to get your financial house in order if you are ready to roll up your sleeves and do some heavy lifting. Here are some tips to spring clean your finances, fine-tune your finances and get a solid action plan in place to crush your goals for the rest of the year.
Pick Your Financial Goal
It all starts with a goal. Goals give your spending direction and tell your money where to go and when. Once you have a goal in mind, you can create a budget or spending plan to help you achieve your goal.
One of the best ways to spring clean your finances is to update your goals list. Sure, we all set new year’s goals, but by the springtime, most of those goals have fallen away or been forgotten. When setting your goal, keep these things in mind.
Goals are Fluid
Your goals are going to change from month to month and day to day. However, you need someplace to start, so pick one or two goals you can focus on right now.
Goals Can Be Short-Term or Long-Term
You might set some goals that you can quickly achieve this week, like updating your beneficiaries on your life insurance and investment accounts, or longer-term goals that take more TLC, like paying off your student loans or saving for a big trip.
Write Your Goals Down
Achieving goals requires proactive action and attention. Writing your goals down somewhere that is visible each day will serve as a reminder to stay focused on the steps you need to take to achieve them. Grab some Post-It notes and post your goals on the fridge or bathroom mirror, or make a note in your phone and look at it each day. Visualizing your goals each day is one of the best motivators.
Be a Detective
If the word budgeting makes you nervous, instead, think of it as detective work. A detective’s job is to pull together clues to solve a mystery. The same can be said for your finances.
Being a detective of your finances requires you to look at your spending patterns. There are loads of mobile apps like You Need a Budget or Clarity Money that can help you categorize your spending. If you are not an app fan, you can easily download your most recent bank statement and categorize your expenses within a few minutes.
There are loads of mobile apps like You Need a Budget or Clarity Money that can help you categorize your spending.
You are looking for trends in your spending that pop out. We all have at least one spending category that needs some attention, such as eating out, subscription fees or auto-pay expenses. These categories are the silent killers to our goals because they eat up savings that we would like to put toward our goals.
Once you have spotted some trends in your spending, you can put boundaries around those categories. Maybe you use the envelope method and put a certain amount of cash you can spend that month in an envelope. You might choose to take your accounts off auto-pay, so you manually pay for those expenses. There is not a right way to manage your expenses, but being proactive and involved in where your money is going is a great way to kick-start your spring cleaning.
Kick It Up
You’ve got your goals in mind, and you have done some digging with your spending. Next, focus on kicking up areas of your finances that you might have overlooked.
The 1 Percent Increase
Can you challenge yourself to increase your retirement contributions by at least 1 percent? A 1 percent increase will not make a dramatic impact on your take-home pay but will boost your savings due to the power of compounding.
Update Your Will
If you don’t have a will, now is a great time to get one in place. Sites like Tomorrow and Willing make getting a will in place easy and affordable. Set aside some time to update your will with any changes that have occurred in the last year.
Grow Your Savings
Where you save your money matters. Banks are paying very little interest on your savings. Why not move your savings to a high-yield savings account, such as Ally Bank, Marcus or Chime, to grow your savings with competitive interest?