Reorganizing your home has become a popular task these days, thanks to Netflix superstar Marie Kondo. While many would-be declutterers are focused on whether their possessions bring them joy, they often forget that cleaning up their finances is even more important.
Here are four ways you can quickly “spring clean” your finances:
1. Inspect your budget
It’s important to ensure you’re financially on-track at all times. The best way to do that is with a household budget.
If you are among the 41% of Americans who have created a budget, according to U.S. Bank, bravo. You have mastered the most basic financial planning tool. But don’t rest on your laurels. Fine-tune your budget to make sure your goals and expenses are still in line with your financial situation.
Don’t have a budget? No sweat. The best time to start one is right now. We created a simple budget worksheet to get you started. Or, you could make your own with a pen and paper or through a spreadsheet on your computer.
Having a budget helped 30-year-old Tiffany Li move out of her parents’ house and make a clean financial break. Li says she freely spent her money before budgeting, but felt it was time to rein things in.
“Every single month, I’m able to figure out how much I spend in certain areas, like groceries, dining out or on happy hour drinks,” says Li. (Check out our list of easy ways to save on groceries.)
2. Cut out recurring expenses
What do Hulu, Netflix, Amazon Prime and your gym membership have in common? They’re all recurring expenses. As more of our lives migrate online, websites use monthly or annual subscriptions as their preferred way to get you to pay for premium features.
It’s a bit of a “gotcha,” since once you set up the recurring payment, it’s easily forgotten. Use your spring financial clean-up to review all of your recurring expenses and cancel the subscriptions and services you don’t use.
3. Turn on paperless document delivery
Turning on paperless document delivery from your bank or other financial institutions can help you tackle two tasks at once: decluttering your home from paper and creating a safe storage space for important documents.
Most companies want you to accept paperless statements. It saves them tons of money in mailing costs. According to CenterState Bank, the average cost for a bank to generate 72 months of paper statements is $61.92. To store the same number of statements electronically is only $0.42. Just make sure you review your statements regularly for changes and important notices.
4. Check your withholding & retirement election
If you have a salary job, it’s important to review your paycheck withholding and retirement plan elections and investments.
Deciding on your withholding tells your employer how much to deduct from your paycheck for income taxes. Withhold too little and you’ll end up with a tax bill. Withhold too much and you’ll end up with a big refund. The latter is effectively an interest-free loan to the IRS, so it’s best to strive for the middle ground of a small refund. (Learn how to use the the IRS withholding calculator.)
At the same time, it’s important to ensure your retirement elections and investments are up to date. An election means the amount of money that’s withdrawn from your paycheck and put toward a 401(k) or other retirement savings account. You should also review your retirement plan investments to ensure they’re still appropriate.
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