April has arrived and depending on where you live, that means spring is either here or on the way. This season exposes how dusty and in disrepair things have become. Just as your home is probably in need of a thorough spring cleaning, your finances may benefit from some reorganization and prioritizing as well. Before you soak up the sunshine and grab a broom and dust pan, let’s look at a few ways to start financial spring cleaning.
MOP UP YOUR DEBT
Excessive debt can put a strain on your budget. Like that mess in the basement, your initial instinct might be to ignore the rising tide of debt. The mindset that by ignoring debt it will somehow disappear leads to dire problems later on.
You have to tackle debt now by developing a debt-managing strategy that leads you into the clear. Here are two steps to get started on financial spring cleaning excessive debt.
First, examine your bills, your regular payments, and calculate the total of how much you owe. You can use a bill tracker to help you chart when bills are due.1
Second, if you discover your debt level is too high or that due dates are too close to each other or to payday, you can call providers to request due date changes. You can also see if other payment options are available. The government’s Consumer Financial Protection Bureau provides educational resources and the opportunity to file a complaint against unreasonable creditors.2
When working through financial spring cleaning, here are some questions to consider involving your spending habits. How are you spending your money? What are you using to spend your money: cash or credit cards? While that credit card may seem easy and convenient to use in the moment, you’ll end up paying the price later when the bill comes due, particularly if you’re not paying off the balance in full every month.
Responsible credit card use allows you to build your credit score; however, misuse and abuse, which can be too easy and tempting, wreak considerable long-term damage to your budget and future financial goals.3
Your best bet is to make corralling your credit cards a top priority during your spring cleaning. Go to the government’s Consumer Financial Protection Bureau for some useful resources to help you better prioritize your money management.4
SPRUCE UP SAVINGS
After you’ve scoured through your budget, rearranged your debts, and swept up your credit rating, it’s time to roll up your sleeves to find ways to build your savings.
Saving money may seem challenging. But following a few easy tricks can produce surprisingly rosy results.
TIPS TO GET YOU MOVING IN THE RIGHT DIRECTION5
- Stick to your budget. Just thinking about saving won’t do it. Commit yourself to it.
- Put cash in envelopes designated for particular purposes after paydays or other check deposits. Once the money is spent, wait until your next direct deposit before adding money to the envelopes. This helps break the credit habit.
- Set up automatic transfers to savings accounts.
- Shoot for short-term savings goals. How about $20 a week? Or $50? Choose a number and stay with it, or increase the amount.
- Contribute to a retirement account as soon as possible; it’s never too late to start. For FERS employees, this means the Thrifts Savings Plan (TSP), which is eligible for a 5% government match.
- Develop a savings plan. Plans keep you on course to your goals.
- Wait a day. It’s the 24-hour rule. Use it when you’re contemplating a big purchase.
- You may treat yourself occasionally. But match what you spend in savings.
- Calculate how much items are worth in time, rather than in dollars. Say you buy a $50 item. How long did it take to earn that money?
- Stick a “Do I really need this?” label on your credit cards.
- Pay off credit cards fully or work toward that goal each month.
- Only use your bank or credit union’s ATM. You’ll save transaction fees.
- Use auto-pay to pay your bills. That way you won’t forget to pay on time.