5 simple steps to spring clean your finances
It’s Marie Kondo’s favorite time of the year — spring cleaning season.
While it’s a good idea to clean out your wardrobe, fridge and that one awful closet in the hallway that’s overflowing with random objects, this is also a great time to refresh your budget and check in on your savings and debt goals.
It seems intimidating at first, but here are five straightforward steps you can take that will make a major difference.
Track your spending habits
Intimated by budgeting? Budgeting is important so that you can constantly stay on top of your goals, savings and making sure you’re on track to pay off debts or loans. But it can seem overwhelming to get started.
Luckily, there are apps like Mint that can track your spending for you. Forget trying to build out an extensive spreadsheet all on your own, budgeting apps will sync up with your bank accounts and credit cards and make note of all incoming and outgoing funds.
Check-in on your debts
If you haven’t already, now is the time to create a payoff plan. There are two methods that make working towards a payoff really efficient: the debt snowball and the debt avalanche.
The debt snowball is a strategy where you pay off your debt in order of smallest to largest, gaining momentum as you knock off each balance owed. The method is designed to help adjust how you behave with money so you can avoid debt in the future by making you stay intentional about payments until you’re entirely debt-free.
The debt avalanche involves you making minimum payments on all debt and then using remaining money to pay off the debt with the highest interest rate. This method often results in you making lower payments over time.
Both plans are useful — it’s a matter of what method you think you’ll stick to.
Review your credit card report
Start brushing up on what you can do to improve your credit score and tackle any reporting errors with your creditors.
Your credit score is based on the following factors: your payment history, the amount of debt you owe, how long you’ve used a credit card and how you’ve managed it, how often you apply for new credit and the types of credit you currently use.
For what it’s worth, the average credit score is 725.
Update your retirement
Aim to contribute at least 10% of your pre-tax income to a retirement account — and if your company offers an employer match, definitely take advantage of it.
Check your safety nets
Make sure you’re covered by all the appropriate insurances: life, homeowners, renters, pet and auto insurance are important examples to keep in mind.
You’ve worked hard to build a financial footing for yourself, why not protect it? Even if it doesn’t seem necessary now, not being covered and facing an unexpected emergency can leave you in a lot of debt — don’t risk it!
While you’re at it, take the moment to update your will and beneficiaries, too.
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