How to spring clean your finances
It’s the perfect time to give your finances a declutter
Spring is a time of renewal and an opportunity to make a fresh start. Many people think of spring cleaning when it comes to their home, yard, or garage. A chance to declutter and remove things they no longer need.
But why stop there? Spring cleaning doesn’t have to just be about moving things you don’t need out of your living space. This can also be a great time to spring clean your finances. Think of it as an opportunity to cut back and remove spending that’s hurting your bank account. A key part of getting a handle on your financial situation and getting yourself out of debt is to get organized.
START WITH THE BIG PICTURE
It is often difficult to know where to start. A great first step is to answer a few key questions:
• What does your current budget look like? Are you running a deficit?
• Do you have an emergency fund in case of the unexpected?
• Do you have any debts that need to be paid off?
• What are your financial goals, both short and long-term?
•How will you get to where you want to be? You will want to assess where you are first, before looking at where you want to go and what you want to achieve. This should involve doing an assessment of any debt that you may owe. Calculate your debt-to-income ratio to see if your debt is manageable and you’re on track to pay it off without any real worries.
This is also a great opportunity to review what you have coming in, what you have going out, and where you can possibly cut back. The most effective tool for this is a household budget. It is a great time to create a budget if you don’t already have one in place. If you do, now would be a great time to review it and make any revisions you think may be necessary. Budgets should evolve with your needs as your life changes.
Many people see budgets as something that tells them what they can’t do. Actually, the opposite is true. Budgets are designed to show you what you can do. They’re meant to help you establish good spending habits and live within your means. Sometimes it can be hard to stay on track, but by sticking to a budget, you won’t need to worry about falling behind financially.
CANCEL WHAT YOU ARE NOT USING
Going through the exercise of creating a budget will help you to see where you are actually spending money, and where you could potentially eliminate, or at least cut back on expenses. Some common examples include:
•Gym memberships – many people sign up, but they do not actually go;
• Subscriptions to magazines or online accounts – many people have forgotten what they have or just don’t use them;
• Free trials that have expired – now is the time to decide whether to continue or cancel;
• Cable TV – many people rarely use their cable, preferring to use other online services instead. Do a detailed review of your expenses and consider what you could do without. As you go through your expenses, you’ll want to think about wants vs. needs. If you are able to eliminate some expenses, you can create household income that can go toward debt repayment or savings.
CHECK YOUR CREDIT SCORE
It is recommended that everyone check their credit score once a year to ensure that everything is accurate and to better understand their credit position. This would be a great item to add to your financial spring-cleaning list. If you have a positive credit rating, you may have an opportunity to create savings by:
• Renegotiating interest rates on your credit card – if you have a strong credit score, you may be able to get a lower interest rate;
• Getting a consolidation loan – which may allow you to combine other debts into one to give you one monthly payment, typically at a lower interest rate.
When you are struggling with debt, it can be very stressful. For many people, the prospect of facing the reality of their financial situation can be extremely overwhelming. As difficult as it may be, avoidance is not a good strategy. It’s better to know if you’re in trouble now than before it is too late. There are solutions available if you discover you’re on the wrong track.
If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information about bankruptcy, or call 1 855 BDO DEBT to book a free, no obligation consultation.