Ah, the sweet scent of spring cleaning! While you're taking on that new backyard project or cleaning out the garage, we encourage you to also take a moment to assess your finances. Your money needs some attention too, and it's well worth the effort. By putting in an afternoon to manage money can help you and your family be prepared for many seasons ahead as well as alleviate unnecessary stress.
With these 7 financial organization tips, you can have a clearer vision of how to spend and save. Enjoy!
- Identify the Clutter
Let's be honest, few like this one. Locating the places where there is clutter in your finances can be a chore– but it's a necessary first step to becoming financially streamlined. Sit down with your spouse or whomever you collaborate with financially and assess if you have clutter in old 401(k)s accounts, credit cards, expired IRAs, investment accounts, etc. Write down each possible place where your money is allocated so you can easily comb through any disorganization.
- Get Rid of Excess Credit Cards
Snip, snip! Canceling a credit card can initially hurt your credit score, but sometimes it may be worth it to close an account. It can prevent you from over-spending, getting too much paperwork and advertising catalogs, and lower your chance of being subject to identity theft. We like to use this 5-step method when choosing which card to cut from the '
- Make a list of your credit cards in order of the highest to the lowest interest rate.
- Transfer balances from the highest rates to the lowest.
- Close the high-rate accounts.
- Make more-than-minimum payments on the low-rate accounts.
- Monitor the rates until the balances are paid off.
- Shred Old Bank Account Statements
Get your paperwork under control by sorting through any piles of monthly bank account statements. These may or may not have been opened, but being able to assemble them into a filing system sorted by year and type of account will be helpful for knowing what you can dispose of. We recommend the old-fashioned yet efficient shoe box method.
- Review Budget, Discuss Goals
This one's important. Communication is the foundation of healthy finances within a family. We encourage partners to sit together at least once a month to discuss where you’re headed financially. It’s wise to take a pen to paper and write down goals to reinforce your financial vision. This will help the family unit work more effectively with saving and spending when everyone's working for the same goal and will prevent disagreements about money, so you can spend more time focusing on what matters!
- Find 1-2 Expenses that You No Longer Need
We often tell our clients to keep a list of everything they purchase within one week. Everything, even seemingly superfluous expenses like Starbucks or flip-flops. By the end of the week-long experiment, people typically have a good idea of what they're spending too much money on. By cutting one or two expenses that you can get away with, you can save hundreds a month, and up to thousands a year. A common example would be getting a coffee and bagel at home as opposed to stopping by the café on the way to work, which saves you up to $1,300 a year.
- Consolidate your Accounts
Most people have one or two bank accounts, but any more can increase your amount of paperwork and fees, not to mention raising your exposure to identity theft. Plus, it's a lot to manage. Start by making a list of all the accounts you currently have, and which ones you could potentially do away with. Research which banking services offer the lowest cost, and then you can transfer your automatic deposits or payments from the less attractive accounts. Think of this as sweeping the dust bunnies out from under the rug.
- Remember to Treat Yourself!
Once you've completed these 6 steps towards better financial well-being, reward yourself with something nice! Whether that's sharing a glass of wine with your spouse or taking your kids to the park, find a way to enjoy the accomplishment. This also gives you something to look forward to when in the midst of organizing money. Viola! A job well