The fresh, clean, organized feeling of spring isn’t just for your closet or garden beds. This is the perfect time of year to spruce up your finances with some planning, weeding, and planting. Use this guide for inspiration. Pick one or two strategies that are worthy of your focus, then dust things up and roll out your spring with confidence!
Ready to get started? You can download a Spring-Cleaning Resource Guide at http://pearlplan.com/springcleaning.
Reassess Goals and Update Your Calendar
The most organized financial lives are goal-oriented. Create and revisit your financial goals as you start to work on your money life. Some goals may be short-term, like creating a budget. Some goals may be more long-term, like setting a future age or date for your retirement. If you think about it, your financial goals are really your life goals that have a cost or require some of your financial resources. So, don’t just think about your accounts. Think about your life.
Once you’ve set your goals, make sure that you have a game plan to implement without chaos. Get out your calendar. Mark dates that will be important for future financial actions. Examples include boosting your savings around the time you get a raise or bonus, reminders to set budgets for big spending times like vacations, back-to-school, or holidays, or scheduling times to meet with your financial advisors.
If you’re in a relationship or make financial decisions along with other family members or important people in your life, it might be time to check in with a family meeting. Some of your goals are likely shared, and cooperation and communication are both critical and potentially challenging. If you need more regular communication, set a monthly financial date where you tackle money conversations as a team. Or, if you’re flying solo, maybe you want to enlist a friend who also has big financial goals so you can be each other’s accountability partner.
Conquer Your Cash Flow
Your budget and cash flow must be under control to assist with the rest of your financial life. Here are some helpful exercises to make sure things are in control.
Do a 90-Day Lookback
It can be overwhelming to try to figure out a 12-month budget if you don’t love spreadsheets and tracking things to the dollar. I’ll be honest, budgeting is not my personal cup of tea either. If you’re not a natural budget diva, take your last three months of spending and do a deep dive. First, grab your paystub and see where the cash goes. Then, pull all your statements or log in to accounts — credit cards, bank accounts, PayPal, or Venmo.
Use a spreadsheet or make a list of where you’ve spent money. Categorize your expenses to see where your coins land. Don’t forget to track down recurring or hidden expenses like subscriptions and app purchases. And if you have kids or a partner, their spending may count too.
As you gather and organize where your money goes, determine what is necessary and what is discretionary. It’s okay to have discretionary spending, but you want to make sure that your money is supporting you in a way that feels right for you. Trim the fat if there are things that don’t align with your current life. Evaluate hidden costs or boost spending on things that are valuable to you.
Reset with a Financial Fast
Did your 90-day lookback reveal careless spending that felt messy? Clean things up with a financial fast. Personally, I don’t love long-term financial austerity. That said, if you feel like you’ve experienced too much spending creep, lock things down for a short period of time to reset you spending habits.
You may decide to minimize spending across the board for a month. Or perhaps there is a certain category of spending that feels excessive. Decide to skip clothes purchases for several months or gather all your unused gift cards to use for weekend spending in lieu of entertainment funded by your bank account.
Financial documents can really pile up. Go through old statements to determine what you must keep and what can go. If you keep monthly statements but the year-end statement has a twelve-month summary, get rid of the duplicates. You may prefer to receive statements electronically. Make a list of accounts that should be adjusted or changed.
Pull off your annual free credit report (annualcreditreport.com) to review your credit accounts. If you prefer to pull this periodically, you can stagger the three agencies to pull them every four months so that you’ll have a frequent cycle for review. If there are unexpected or unattended accounts, take care of business. Having trouble making payments? Change your payment method or address your cash flow issues with a return to the budget strategies. It’s okay to seek credit counseling if the challenge requires professional assistance.
Sometimes investors seek diversification via account location. Old employer retirement accounts and small accounts opened along the way can be collecting dust and largely forgotten. Unattended accounts are not necessarily diversified, and sometimes neglect can cost you. If you have too many accounts, set aside time for a review process to determine a strategy to reorganize for management and success.
Tie Up Loose Ends
There are so many opportunities to clean up messy money spots in your life. And let’s be honest: Sometimes those neglected tasks contribute the most stress and anxiety to your financial life. You know you should do them, and that knowledge travels with you as an uninvited angst-laden companion.
Make a list of neglected tasks so that you use your spring-cleaning energy to accomplish the maintenance your financial life deserves. Some examples to consider:
- Updating your beneficiary designations
- Investing forgotten cash in retirement accounts
- Drafting or updating your estate plan (wills, trusts, powers of attorney, healthcare power of attorney)
- Boosting your percentage of savings to retirement accounts
- Setting a goal for cash levels of your emergency reserves
Whew! That’s a lot. Not sure where or how to get started? Lists are a great way to get going. Set a timer for a 15-minute brainstorm, putting pen to paper with your personal financial to-do list. This will help you to stop the avoidance and start the action plan. You can prioritize by the most urgent actions or the easiest to get done.
Whether your list is long or just a few items, accomplishing these money house-cleaning chores will come with a return on investment for you and your money. And I wouldn’t be surprised if it feels like a health investment in your personal wellness. Take things one at a time so you don’t get overwhelmed. As with most endeavors, incrementalism is your friend.
I always say a well-lived financial life is the compounding return of good decisions over time. Spring cleaning your financial life is a gift to yourself. You’ve got this!
Melissa Joy, CFP®, CDFA® is a financial planner and divorce financial analyst with more than two decades of experience in the world of financial services. In 2018, Melissa fulfilled a lifelong dream of starting her own company by founding Pearl Planning, located in Dexter, Michigan with additional locations in Grosse Pointe, Birmingham, and Charlevoix.