5 Ways to Spring-Clean Your Finances
You've probably heard of spring-cleaning your home, but in addition to decluttering your garage, clearing out your basement, and tackling that porch repair you've been putting off all winter, it pays to spend a little time tidying up your financial life as well. Here are a few ways to get your money-related affairs in order.
1. Review your budget
Following a budget is a great way to track your spending and avoid going overboard. But if you've been sticking to the same budget for quite some time, it pays to sit down and revisit it. It could be that certain expenses of yours increased (say, your monthly rent recently jumped by $50) or that others went away (say, you finally paid off your car), so it makes sense to assess your budget for accuracy and make adjustments as necessary. This especially holds true if you're spending more on a regular basis than you were when your budget was first created.
2. Get your paperwork in order
Many of us have financial paperwork taking up real estate in our desk drawers or filing cabinets. If you can't remember the last time you looked at yours, now's a good opportunity to get organized. Scan key documents and store them electronically so that they don't degrade or get lost over time. Then, invest $50 in a shredder to dispose of them safely and avoid identity theft.
3. Make your sure your withholding is correct
The amount of tax you have withheld from your paychecks during the year will dictate whether you owe money to the IRS during tax season or wind up with a refund. Ideally, your goal should be to get as close to breaking even as possible, so if you get a huge refund this year, make a point to update your W-4 by claiming more allowances. And if you end up owing the IRS a large chunk of cash, consider claiming fewer allowances. Updating your withholding is generally a simple matter of approaching your payroll or HR department and submitting a revised form.
4. Identify looming expenses -- and map out a plan to save for them
Chances are, you'll have at least one major expense on the horizon between now and the end of the year. Maybe it's your summer vacation, the wedding you're participating in during the fall, or the holiday season -- a universally expensive time of year. Either way, be sure to identify any big expenses you're likely to face, and come up with a plan to cover them so that you're not forced into debt. For example, if you think you'll spend $1,000 on the holidays, cut back on leisure spending so that you're banking an extra $125 a month between April and November. Or, find yourself a side job that puts that money in your pocket.
5. Check your credit report
If you can't remember the last time you reviewed your credit report, now's a good time to sit down and give that document a read. You're entitled to a free copy of your credit report every year from each of the three major bureaus (Equifax, Experian, and TransUnion), so request yours, examine it, and report any mistakes you spot. Erroneous information on your credit record could drive down your credit score, making it more expensive for you to borrow money. And since an estimated 20% of credit reports contain mistakes, there's unfortunately a reasonable chance that yours has one as well.
With spring in the air, now's the perfect time to get your finances in order. And the stronger an effort you make, the better shape you'll wind up in.
The $16,728 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.