See the results of our 2022 Personal Finance Study!
Spring Clean Your Finances With These 5 Expert Tips
Spring is a great time to usher in a fresh start. That’s why more than 77% of people use this season to declutter their homes — tossing papers, donating clothes, and organizing their remaining belongings. But don’t stop at a home refresh.
Organize your financial life.
Toss those dusty receipts and organize important financial documents. Take stock of your financial situation, reset your money goals, and get on track. Just a little spring cleaning can give you the jump-start you need!
Feeling inspired to get your financial life together? Here’s how to refresh your personal finances.
- Take stock of your financial standing.
- Create a short-term budget and long-term financial plan.
- Declutter physical documents.
- Clean out digital inboxes.
- Make a plan to tackle bills and debt.
- Use motivation to keep it up all year long.
The first step in organizing your finances is to take an overview. Where do you stand? Gather all of your financial documents, bills, receipts, goal lists, and other relevant materials. Go through each one and build your financial story. Analyze your earnings, expenses, and savings.
“[E]very year I sit my reluctant husband down and we go through last year’s spending to make sure we understand where our money is going,” said Tess Zigo, a CFP. “In order to make the process fun and simple — since we are busy parents of two toddlers and don’t have all the time in the world to spend tracking receipts and expenses — we use a tool that links to our credit cards so it puts together an annual summary for us and categorizes our expenses. Knowing your current financial standing helps you plan ahead so you can decide on what is most important and start taking small steps in that direction.”
If you don’t have a tool that automatically breaks down your expenses into budget categories, do it yourself. This will reveal a clear picture of your spending and saving patterns — including categories where you overspend. The most common budget categories include:
The costs to live in a home, including rent or mortgage payments. This is often the largest category for most budgeters.
Utilities are vital to keep a household functioning, including electricity, water, gas, heating, and air conditioning.
How do you travel from point A to point B? These costs may include public transportation, car payments, gas, tolls, car repairs, and parking.
Groceries are an essential part of any budget. Many people also include a discretionary fund for dining out or ordering takeout.
There are different types of insurance — some are essential and others are optional. Consider health insurance, homeowner’s insurance, renter’s insurance, life insurance, auto insurance, disability insurance, and pet insurance for starters.
Spending in this category includes money spent on health care or medical costs that don’t include insurance, such as out-of-pocket costs, medications, and copays.
Student loans, credit cards, personal loans. Any money that is borrowed and needs to be repaid should be included in this debt repayment category.
Saving and investing
Saving money is one way to ensure your financial health in the future. Don’t forget to “pay yourself first” by setting aside money in a savings account, emergency fund, or retirement account. This category should also include investments, which may allow your money to grow over time.
Personal spending is a catch-all for personal care expenses. Often this includes clothing, a gym membership, hygiene supplies, and basic household items, like laundry detergent.
Recreation and entertainment
The entertainment and recreation budget is often referred to as fun money. This category includes subscription services, tickets, events, vacations, and dining out at restaurants — if it’s not included in your food category. When looking to cut expenses, most budgeters will reduce entertainment first.
The miscellaneous category is unique to your situation. It typically includes expenses that are unbudgeted or uncategorized.
Once you categorize your spending, compare how much you spend versus how much you make in income. If there’s an opportunity for change, now is the time to do so.
Zigo also suggests pulling an annual credit report in order to “know your credit score which affects more than loans — including your home and auto insurance premiums.” An overview of your financial situation will come in handy to define your financial goals and create an actionable plan in the next step.
The next step is to use your financial documents to create a financial plan. The goal here is to not only sort and organize your financial information, but to use it to create a financial plan. In other words, you will allocate your income to budget percentages based on your unique financial situation. Thus, creating a short-term budget and comprehensive, long-term financial plan.
“The most critical step in getting your finances in order is to create a comprehensive, completely individualized (no generic assumptions) financial plan showing year-by-year results,” said Drew Parker, the creator of The Complete Retirement Planner. “Seeing exactly where you stand in black and white, along with a thorough forecast of what your financial future looks like year by year is eye-opening.”
What is a financial plan? A financial plan allows you to establish realistic goals, and then take steps to achieve those goals over the next several years.
“This is a detailed long-range planning tool that accounts for all of your personal variables, year by year, including a budget that varies over time, tax liability, debt as a percentage of your income, retirement savings goals, a plan for savings withdrawals during retirement, Social Security income based on your claiming age, and much more,” Parker said. “Your financial well-being is too important to rely on guessing or generic benchmarks and assumptions that don’t apply to you. Create a financial plan using only your personal information to know exactly where you stand, and where you are likely to end up.”
A long-term financial plan is essential, but don’t forget about short-term budgeting plans. Create a daily, weekly, or monthly budget and make changes often. Because like all other areas of our lives, our finances aren’t static.
In order to create a solid monthly expense plan, review income and expenses. Then make a budget based on these metrics.
“Set up a spreadsheet with all of your recurring business or personal expenses every month,” said Shelby Ring, the CEO at Ruby Riot Creatives. “A key thing is to look through your credit card charges and bank transactions, rather than relying on email receipts or bills. Take the same step for accounting for money coming in. Getting clear on your true metrics for what you’re working with is the key to taking back your power and seeing the full picture of where your money is going and how to make your money work for you.”
Review often. Your finances will change and so should your budget. And remain flexible with your finances — allowing you to handle financial emergencies with ease.
Financial paperwork is an easy, but tedious category to organize, because it exists as tangible papers. If you have a huge pile of paperwork, bills, and receipts that are out of hand, follow these tips.
Create a pile. Sort each paper, deciding whether to keep it or toss it.
Organize saved documents in a secure dedicated space.
“Buy a special container or filing cabinet strictly for all personal finance paperwork that you can safely store and organize it in,” said Deborah Sweeney, CEO of MyCorporation.com. “Color code, if necessary. You may organize your personal financial documents by certain color-coded tabs on their files.”
Another idea is to scan documents and upload them to a virtual tracking system.
“If you are storing certain personal financial matters via email or through the cloud, use specific labels (as opposed to vague ones) to make it easy to find everything,” Sweeney said.
For everything else, shred it — especially if it contains sensitive information.
Now that your physical documents are in order, it’s time to turn to your digital finances.
Don’t forget your email inbox — a tool you may be neglecting. Clear out your email inbox down to zero new emails. Hit unsubscribe to all the pesky ads and offers to prevent impulse spending.
Next, clean up your digital subscriptions. If you’re paying for a service, hopefully you’re using it. Otherwise, nix that unnecessary expense. These costs add up — even if it’s only $5 or $10. Set aside time to manage your subscriptions on a regular basis.
Finally, reconsider your digital providers. A comparable provider in your area may have better deals, so comparison shop. Check for hidden costs from your service providers and don’t be afraid to negotiate.
Rely on a repayment strategy funded by a budget to pay off bills and debts. Creating systems that work for you is your best weapon against falling back into a negative financial pattern.
“To pay down debt, you must first have a very clear picture of your overall debt situation,” said Alissa Todd, a financial advisor at the Wealth Consulting Group.
Create a list of each expense — credit card, student loan, personal loan. Write the total amount owed, interest rate, term length, and payment due date. Then, decide whether to use the avalanche method — prioritizing high-interest debt — or snowball method — paying off the smallest dollar amount. There are pros and cons to each method, so choose wisely.
A budget is the best way to follow through with a debt repayment plan. To do so, identify the type of expense each bill or debt payment falls under:
These expenses require the exact same payment amount on a consistent basis. Examples include housing, such as rent or a mortgage, and student loan payments.
Variable expenses change from week to week or month to month. They are expected, but the amount varies. Examples include groceries and credit card payments.
Expenses that don’t occur on a regular basis are considered periodic. Examples include maintenance costs, gifts, and taxes.
Make sure your budget accommodates these expense types to fuel your repayment strategy. For example, fixed expenses like a student loan or personal loan payment will likely be the same amount each month. These are easier to plan for in a budget. But credit card payments vary monthly and taxes vary annually. So long-term preparation is key.
Purging and organizing are stressful. They are time-consuming, energy-depleting, and maybe even emotionally draining. Throughout this process, treat your finances, but most importantly yourself, with kindness.
“Another great tip worth mentioning is adding positive affirmations through this process,” Ring said. “Having a mantra affirming why you are looking at things you are afraid of or feel powerless about can be really motivating and get you through at discouragement.”
Here are a few positive money affirmations — pick the ones that work for you:
- Money is working for me.
- Money is attracted to me.
- I attract prosperity.
- I attract wealth.
- I commit to living my financial dreams.
Write down a mantra that resonates with you and repeat it during your organization process. This will help you stay motivated and on track to financial health and wealth.
Don’t wait for spring to declutter and organize your money and finances. Apply these principles year-round when you need a fresh start.
Drew Parker is a former Business Financial Planner and Financial Manager for a $4B company, with extensive experience in building financial planning tools. In 2017, he created The Complete Retirement Planner (TCRP) to help households who have no written financial plan, and who are unsure of how to create one.
Shelby Ring is the chief cat herder at Ruby Riot Creatives; a digital marketing firm based out of Charleston, South Carolina, that specializes in video production, photography, and SEO content and branding strategy.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services.
Alissa Todd is a Wealth Advisor at The Wealth Consulting Group where her team helps clients simplify their financial life and use money to live a life they love. Todd learns what is most important to her clients and then creates an implementable action plan to help them pursue financial independence.
Tess Zigo studied finance and accounting at Northern Illinois University and spent several years working in treasury management. Over that period, Zigo developed a passion for personal finance and investing, but quickly learned that she loved people more than spreadsheets. She decided to get in front of real people dealing with the same real money issues that she struggled with—balancing the need to enjoy life today, while also being responsible for the future. As a mother of two toddlers and a business owner, she understands the challenges her clients face with the never-ending demands on their time and energy. This article is meant to be general, and it is not investment or financial advice or a recommendation of any kind. Please consult your financial advisor before making financial decisions.