With spring in the air many people start to think about spring cleaning in their homes and gardens. How about this year concentrating your efforts on a financial spring cleaning? So sit down with your thinking cap and let’s get started!
- Formulate a Plan and Set Reasonable Goals.
This is the why of financial spring cleaning. Are you in debt, unorganized or too busy to have a financial plan for your money? You need to dream about what you would do if you had money. Travel, give, save, and invest for your future? This is the place to figure out why you are willing to get your life in order.
- Build a Budget
In this step you will sit down and list your monthly take home income at the top of the page. Then you will list your expenses starting with savings, food, housing, utilities, transportation and reasonable clothing. Keep spending down the sheet until you have spent your income on paper for the month. You can go back and adjust categories as needed, but it must come out to a zero on the bottom. This is how you will spend your money this month.
- Involve Your Spouse and Children
This will be a family affair, so get input and ideas from your family on how you can cut expenses and save money or pay off debt. If you are out of debt, what would you do or where would you go? How would your stress levels be different if you had no debt and a financially clean home?
- Build a Small Emergency Fund
Having a $1,000 set aside for emergencies will help you to not go further into debt while you are paying off consumer debt.
- Take One Step at a Time
When trying to pay of many debts list them from smallest to largest and pay minimum payments on each. As you squeeze money out of your budget, pay extra on the smallest debt. Once that is paid off, you can apply that payment to your next debt and continue on up your list until you have eliminated all debt.
- Design a Weekly Budget Check-up with Your Spouse
This weekly check should take no more than 10 minutes. You are just checking your progress and adjusting the budget where needed. If you are spending more in one category, you will need to reduce your expenses in another category so that you stay balanced.
- Stop Investing in Retirement Temporarily
Even if your company is matching your investment, that money is better used to pay down your debt right now. You do not want to borrow from your 401K, so it is better to stop contributions temporarily and attack your debt.
- Use Cash
Studies have shown that using cash for purchases makes you spend less and save more. Spending cash registers as pain in your brain where credit and debit do not. Cut up your cards and use cash instead. It will help you to save more each month.
- Have a Garage Sale
As part of your spring house cleaning, set up a garage sale to bring in extra cash. This could go towards your $1,000 emergency fund or to pay down debt faster. If you don’t need it, use it or love it, sell it!
- Take a Class
Find a personal finance class in your area, such as Dave Ramsey’s Financial Peace University. This will help you to learn more about eliminating debt and saving for your future, so that you can get pointed in the right direction for success!
Kathryn Gerken blogs at www.GerkenFinancialCoaching.com twice each week. She and her husband Tim are Financial Coaches in the Seattle area.
Photo Credit Nationaal Archief