I follow tons of blogs that focus on organizing the home. I love looking at perfectly organized closets, bookshelves, and refrigerators. I find myself continually pinning new pictures to mimic in my own home. I even put myself on a 30-day spring declutter challenge and have already gotten rid of 20 items. As I put together a checklist of things and rooms I needed to declutter, I began to think about our finances and how some of those same cleaning rules apply. One of the most important parts of getting your finances in good shape and getting out of debt is to organize your finances. I thought, Spring Cleaning also applies to our finances as well.
Organizing your finances isn’t as tricky as it sounds. Once your budget, documents, and bills are in order, your finances will be much easier to manage. You won’t find yourself robbing Peter to pay Paul or worried that you won’t have enough money to last until your next payday. If you’re ready to start spring cleaning your finances, check out the steps below that will whip your financial house in shape.
Clean Out the Clutter
Many people live paycheck to paycheck because they don’t have their documents are all over the place. Important documents such as life insurance policies, birth certificate, marriage licenses, etc. should be kept in a safe place. I also have copies of these documents on an external drive just in case something happens to our papers. These documents need to be readily available because you never know when someone is going to ask for it.
You should also gather your phone, utility, auto loan, mortgage, and any other bills that require monthly attention in one place. I would even go as far as creating a separate folder for bills that come around one to two times a year such as car registrations and yearly taxes. Keep them in folders, an excel spreadsheet, financial software, or a phone app. Just pick one that you can stick to using.
Create a Budget with a Free Budgeting Tool
You cannot clean up your finances if you don’t learn to budget. There are plenty of free tools to use such as Mint, Every Dollar, Pocket Guard, Level Money, and Wally to name a few. Budgeting is a skill anyone can and should learn and these tools will help you get started.
Now that you’ve gathered all your bills, it’s time to write down your monthly expenses including fixed, debt, and variable expenses. You should also include any discretionary spending money in your budget. Include all sources of income. If you need to cut back on your discretionary fund, do it. All necessary obligations must be met before any other money is spent. Next, you need to track your spending. Keeping track of your expenses is a great way to view how much you are spending each month. To get a more realistic view of how much you’re spending and tracking your spending for at least 30 days straight. Doing this will help you create a more realistic budget the next month.
Many people will create a budget in January and put it away for months. To budget properly, you must be consistently reviewing it at least once per month. Some expenses change from month to month. Everything from birthday gifts, oil changes, etc. should also be included in your budget. A regular review of your budget is an essential part of financial freedom. Budgeting allows you to control your money. Review any unexpected expenses immediately to get back on track.
Automate and Set up Reminders for Bill Payments
After you’ve tallied all your bills, you breathe better because you know what’s due. Now you need to set up a system that will guarantee you’ll always pay the bills on time. My husband and I keep a large calendar on our fridge with our billing due dates. We only have one bill automatically paid from our account. Everything is manually paid. I track each bill due date in my monthly planner. You can also set up monthly on your computer calendar that links to your phone.
Automating your bill payments is a great way to always pay on time. You won’t have to worry about overdraft because sticking to a budget gives the peace of mind knowing money is available to cover that draft.
Set Your Due Dates with Your Paydays
Let’s face it. Some of us don’t make enough money to pay bills out of one paycheck. If you fall into this category, don’t be afraid to ask your credit card company, auto loan company, mortgage lender, etc. to change your payment dates. Companies would rather change your due date than receive a call every month to request an extension. Doing this will ensure you aren’t late on your payments and help you get out of debt faster.
Create a Debt Repayment Plan
Debt is a huge issue in most households right now. Debt hinders us from living our dream life. Think about what you could if you had no credit card, student loan, car loan, and even IRS debt. You’d be free to save, invest, vacation, and much more without having that weight on your financial shoulders. Even if you only have an extra $50 to throw at it, create a plan to get out of debt. Setting an end date gives you a specific focus. Evaluate how much you owe by tallying all your debt, smallest to largest, and get to work. Once you know how much it will be easier to create a plan to get it paid off.
Start an Emergency Fund
There is nothing like having money in the bank. Even if it’s as little as $500 people tend to breathe a bit easier knowing they have a little cushion to soften a blow. Car repairs, last-minute doctors visits, job loss, and more is already stressful. Just think about if you didn’t have the money to cover it. Murphy’s law is never convenient. It ’s important to start saving something now. Not having an emergency fund prevent us from getting out of debt because we will always use plastic as an emergency fund.
I know everyone says to keep $1000 in your account and use the rest for debt repayment. I personally don’t feel comfortable with such a low amount because most emergencies tend to be over that amount. I’d like to have at least three months of an emergency fund. If you don’t have any money saved, start small by saving at least $25 per month and put that in a savings account. Look for ways to fund your account by cutting back on eating out, shopping, etc. Work overtime or extra jobs to fund it. When I first started saving it was hard, but once those numbers began to increase it made me feel like I accomplished something. I cringe anytime I think we have to withdraw from that account. If it seems overwhelming, set a small goal to save $100 to $200 by a specific date. Once you hit that target, create a new goal, and keep going. Automate the savings so you won’t even see it. Remember to pay yourself first; otherwise, it will be harder to save what’s left at the end of the month.
Spring cleaning your financial house helps you not only stay on track, but it gives you a sense of accomplishment. You won’t feel like you’re drowning in your circumstances. It helps you feel empowered. You can kick debt in the face. Just think about how you feel when your house is cleaned from top to bottom. I know I feel more relaxed, comfortable, and at peace. This applies to your financial house as well. Say goodbye to late notices, debt collectors, and debt Happy Cleaning!!
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