Did you know spring cleaning is for your finances, too?
From time to time everyone should take stock of their financial situation. If you think of yourself as a financially savvy person, you probably make smart money decisions and do whatever it takes to avoid money blunders. But even if you’re responsible, your financial life might take a backseat to other things happening in your life. You might have a job, a family, health issues, and other responsibilities that consume a lot of your mental energy. This doesn’t mean you ignore your personal finances, but you might not give it the attention it deserves.
Spring is here and many people have begun spring cleaning their lives. This might include decluttering their homes and getting rid of stuff they don’t need. For some, it’s also a time to spring clean their finances.
Everyone needs a firm grip on their money, and if you can’t remember the last time you did a financial check up, here are eight tips for a financial upgrade.
1. Review Your Life Insurance Policy
If you don’t have a life insurance policy – get one. And if you have a policy, review your coverage to make sure it’s still adequate.
Life insurance and death are two topics nobody likes to think about. But a policy purchased years ago may not provide the coverage you need today. Our situations can change from year-to-year. We can get married, divorced, start a family or take on additional debt. And depending on what’s occurred in recent months or years, we might need to upgrade our life insurance policies.
There are no hard or fast rules regarding how much coverage to have, as each person has to decide the best policy given his circumstances. If you have dependents, a spouse or if others rely on your income, consider a policy that’s seven to 10 times your annual salary. If you’re single without dependents, purchase a policy that can cover your funeral, burial and pay off any outstanding debts you might have.
2. Automate Your Savings While Spring Cleaning Your Finances
Saving money is one of the hardest things to do. If your savings account is stagnant and you don’t have a lot of disposable income to build your account, look into automated savings options. For example, Wells Fargo has a Way2Save program. For each debit card transaction, the bank transfers $1 into a linked savings account. Speak with your bank or credit union to see if they offer similar options. Find other options that meet your specific needs in the financial marketplace.
3. Choose a Better Bank
You can also build your savings account quicker by choosing accounts that offer a higher yield. Bank savings rates vary. If you’re earning pennies right now, a great way to spring clean your finances is to shop around and compare options to get a higher interest rate and grow your account a bit faster. Savings accounts offering better rates include certificates of deposits, money market accounts, and online high-yield savings accounts.
4. Get Disability Insurance
If you’re permanently disabled, you might qualify for disability compensation through your state. But what if you’re temporarily disabled? Do you have enough in savings to cover your expenses for two, three or six months?
Even though money experts recommend everyone have a cash cushion, this is easier said than done. You need a backup plan. If you don’t already have one, talk with your employer while you’re spring cleaning your finances to see if the company offers disability insurance, and sign up as soon as you’re eligible. You can also purchase disability insurance on the private market.
5. De-Clutter Your Home Office
Too much clutter and stuff can mess with your peace of mind, and if your office is a mess, you might be less productive during the day. As you spring clean or upgrade your financial life, think of ways to simplify and better manage paperwork. For example, shred old documents that you no longer need, such as tax returns older than three years old or old bank and credit card statements. You can also switch to paperless statements and reduce the amount of paperwork coming into your home. It might be easier to keep track of due dates when you receive statements electronically.
6. Get the Most Out Of Your Credit Card While Spring Cleaning Your Finances
You might have a long-term relationship with your credit card company, but this doesn’t mean it’s the right credit card for you. There are several types of credit cards available, and to get the most out of your credit card, you need to choose one that’s a match for your lifestyle.
If you only use a credit card for an emergency, you might get by with a no-frills credit card. But if you enjoy earning cashback or miles each time you use a credit card, you need a rewards credit card that can help you save on future purchases.
Then again, maybe your credit card company charges a higher interest rate and you know you can do better elsewhere. Don’t think you have to be loyal to a particular credit card. Periodically compare what’s on the market and choose the card that’s right for you.
7. Cut an Expense While Spring Cleaning Your Finances
Cut an expense from your budget every couple of months to save money. It doesn’t have to be a large expense. It can be as simple as getting rid of cable and using online streaming services to save money. Or if you’re barely using your gym membership, or if your apartment complex has a fitness center on-site, you can cancel your membership and keep $30-$40 in your pocket every month – or start exercising outside for free. Read more ways to reduce your household expenses.
8. Look for a Second Income Stream
I’m a firm believer in having a second income stream. Understandably, I know this doesn’t work for everyone. But if your day job only covers your monthly expenses, and you don’t have cash for saving, vacations, or paying off debt, a second income stream can provide the disposable cash you need to get ahead or enjoy life a bit more.
You don’t have to obsess about your financial life, but once or twice a year (and maybe in springtime), take stock of your current financial standing and decide whether there’s room to improve.