5 Steps to Spring Cleaning Your Finances

Ahh, Spring is in the air, which of course means time for Spring cleaning! I actually like spring cleaning, in all forms. But being a financial geek, I especially love cleaning out the financial cobwebs and digging money out of forgotten corners.

Many of us have just finished (or are about to finish) our taxes, and we have an up close and personal perspective on our money situation.

So, right now is the perfect time to analyze everything for the upcoming year. You might not enjoy spring cleaning, like I do, but it’s one of the quickest ways to improve your money situation.

And after reviewing your progress, you might find yourself feeling even more motivated to complete your financial leap list and other goals.

1. Start at the top, work your way down – organize your files

I. Hate. Paperwork. It’s the bane of an OCD person’s existence.

Like the saying goes with normal spring cleaning, you “start at the top and work your way down”. The first thing that needs to be handled is excess papers and files.

Here’s my step-by-step solution to cleaning up paperwork clutter:

• Shred or trash papers you no longer need
• Save time by creating a To-File and To-Do type of folders
• Use boxes or file cabinets to hide messy papers

Important papers to keep:

• Tax returns and tax-related papers
• Last year’s insurance policies (toss out older copies)
• Investment statements – I keep mine in a black binder

Papers to trash or shred:

• Shred bank statements once the accounts are reconciled
• Trash ATM and deposit receipts after verifying them
• Any expired coupons or bills that are no longer valid
• Shred any old paycheck stubs and canceled checks

2. Review and consolidate bank accounts

I have 1 checking account and 2 savings accounts. I did have 3 savings accounts, but decided that it’s much simpler to eliminate bank accounts that aren’t necessary.

If you’re single like I am, you probably don’t need more than 1-2 checking accounts and 1-2 saving accounts. (Check out ImpulseSave.com if you want to have multiple savings goals, but only 1 account).

If you have a spouse or partner, you will probably have a 3 checking accounts and 2-3 savings accounts – a yours, mine and ours. Even for a bookkeeper like me, it can be difficult to properly keep track of all the incoming transactions for each account.

So go through your accounts and evaluate if you need all of them. Try to keep everything as streamlined and as simple as possible.

3. Negotiate for lower interest rates

In the U.S. right now, interest rates are at an all time low, especially for mortgages. If you have a mortgage with an interest rate higher than 5%, you might want to consider refinancing. To get the best rates, apply with your local credit union or community bank.

Credit cards are the next thing on the list, which tend to have the highest interest rate of any debt. If you have decent credit or steady payment history, try calling your credit card company and requesting a lower rate on your card.

If that doesn’t work you might think about taking advantage of a promotion like 0% interest rate for 15 months, by transferring your balance.

Finally, if you have a car loan or personal loan, you should call the loan company and ask if they offer any discounts for a lower interest rate. I was able to drop my auto loan rate by 0.25% since I linked my checking account to it, at the same bank.

4. Dust the cobwebs off your credit score

Everyone should check their credit score at least once a year, if not every few months. Doing this will help alert you to any fraudulent activity or errors as quickly as possible. You can check your credit score and report for free anytime, by going to CreditKarma.

Just like a yearly doctor’s check up, you should do a quick review of your credit report. The longer you let it go, the higher the chance of having problems and serious issues in the future.

5. Polish up other bills and policies

Some bills are set up on an annual basis, like car insurance policies and home/rental insurance, and only need to be spot shined a few times a year.

When these bills come due, it’s the perfect opportunity to reassess and negotiate for a lower price. Point out how long you’ve been a loyal customer, ask if the insurance company has multiple discounts and use good credit history as a bargaining chip.

Review any regular monthly bills too, like gym memberships and cable/TV services. Are you really utilizing them or are you paying for services you don’t use anymore? I canceled my TV satellite service over a year ago, and am saving $90 a month.

Cleaning up to make room for more

Small changes and updates may seem insignificant, but they are very important. It only takes a few hours to update yourself, throw extra papers out and spring clean your finances.

Once you’ve hit the “reset” button, you can take it one step further and find out how to make extra income with a hobby, or maximize the time with your freelance clients. Getting organized will save you time, money and get you back in control of everything.

Do you spring clean your finances?

Photo Credit: SimpleLiving