Spring is almost out the door, and those seasonal cleaning duties—sweeping the garage, clearing out the gutters, washing the windows—are probably still nagging at you. But, if you’re like many of us, there’s one spring cleaning task that you need to tackle, like, yesterday: Your finances. We asked the folks at LearnVest to break down the finance challenge for us. From technical insights to practical suggestions, we’ll let LearnVest take it from here.
According to a nationwide survey conducted by LearnVest and Chase Blueprint®, about 50% of U.S. adults between the ages of 25 and 54 regularly worry about money—and 40% feel that they lack control over their finances.
Given these eye-opening stats, we asked five experts—as well as seven LearnVest readers—to share their best advice for getting your finances in shape this spring, from educating yourself about money to starting the journey toward being debt-free.
WHAT THE PROS SAY
1. Get Everyone on the Same Page: Monica Kaden, an accredited senior appraiser and principal at Fischer Barr & Wissinger, LLC, says that spring cleaning needs to start with dividing up the workload. “Typically, in a couple or a family, there’s one person who handles the household finances,” she says. Her advice is to have the other spouse—and even older children—sit down with the person who handles the bills, budget, and important financial documents, so that multiple people are knowledgeable about the household’s finances.
This way, family members can bounce ideas off of each other for reducing spending and finding room in the budget for more savings. Kaden suggests each task. Even teenagers can help by managing their own checking accounts or researching college loans.
2. Take Inventory of Your Possessions: Getting organized is half the battle when it comes to spring cleaning. If your home was to succumb to a fire, earthquake, flood or other catastrophic event, would you be able to account for everything—including how much you paid for the big-screen TV and your favorite leather armchair—so your insurance company could properly reimburse you?
“Insurance companies try as hard as possible to pay out the least possible,” Rachel Sanborn, a certified financial planner at LearnVest Planning Services, says. So it’s important to keep a record of the items in your home—particularly the most expensive ones—including photos of the items and their receipts.
Some websites offer online checklists to help guide you in creating your inventory. Sanborn even found an iPhone app—Know Your Stuff—for tackling this task. Added tip: Be sure to store a copy of your final inventory in a spot that’s readily accessible outside your home, like an online Google Doc.
3. Reduce Financial Clutter: “You have to clean up your financial past (debt), while trying to live in the present moment (managing cash flow) and planning for the future simultaneously,” says Julie Murphy Casserly, a CFP® based in Chicago. For those whose plans for financial spring cleaning include paying off debt, Casserly says that they need to first address the issues that created the debt in the first place—and that means dealing with the emotions that surround money.
“People need to find a compelling reason to change; it has to be tied to some dream or goal that’s different from their current reality,” Casserly advises. Think concrete goals, such as “I want to pay off one of my debts, so that I can save for a trip to Bora Bora” or “I want to pay off two of my debts to see my credit score increase.” You can start by setting up an automatic debt payment that comes out of your account each month. If you put it on autopilot, Casserly says, you can’t find another way to spend it.
4. Get Shredding: Mike Falco, a CPA in Pennsylvania, says that now is the time to shred any old financial documents. A good rule of thumb: Keep tax records for seven years, pay stubs and bank statements for a year, and credit card statements for at least 45 days.
Keeping in line with Falco’s “out with the old” mindset, also take a look at your beneficiary forms—which designate who will receive your assets if something happens to you—and update them, if necessary. Beneficiary forms are legal documents that will stand up against a will, so make sure that the person on those forms is the one who you’d want to have your assets.
5. Rethink Your Insurance: It’s easy to buy an insurance policy—or accept your company’s—and then just let it gather dust … a spring cleaning no-no! But Sanborn says that reviewing your various insurance policies is a great way to free up money for future goals.
If you have an emergency fund—and you should!—you can consider increasing your deductible (the money you would have to pay before your insurance kicks in), which will bring down your insurance premium (the amount you pay every month). “Emergency funds are intended to cover things like deductibles,” she says.
Additionally, if you have children, and you have a separate policy from your spouse, you should make sure that the kids are on the plan with the lowest premium. Beyond these tweaks, however, Sanborn recommends that you leave your insurance coverage alone: “It’s better to have more coverage than you need.”
WHAT LEARNVEST READERS SAY
6. Leave That Wallet Behind: “I used to make frequent, impulse purchases in the middle of the workday— buying snacks is my financial Achilles’ heel. So my trick is to leave my wallet at the office during my lunch break, which makes spur-of-the-moment buys literally impossible!” – Stephanie, Arlington, VA
7. Rename Your Accounts: “I changed the names of my checking and savings account names to reflect their purposes, ranging from “Emergencies ONLY”, “Do you really need that?” and “Needs Not Wants.” The simple act of nicknaming my accounts has, in a very short amount of time, changed how I interact with them—and my money.” – Elena, Eugene, OR
8. Treat Shopping as a Scouting Mission: “I never make a purchase when I’m at the store. If I like a particular piece of clothing, I’ll look at the quality, try it on for size and then put it back. Over the next week or two, I’ll consider if it’s something that I still really want or need, and then I’ll search Google for a promo code and either order it online (with free shipping, of course) or go back to the store to buy it. I’ve eliminated all of my impulse shopping by doing this.” – Charmin, Scottsdale, AZ
9. Consider Your Cost Per Hour: “I sometimes compare the cost of an item, meal or experience to how many hours (or days) of work it’s worth. Say I make $30 an hour, and I’m considering a $60 sushi meal. I have to evaluate if it’s worth my two hours of work!” – Namrita, New York, NY
10. Adopt the ‘One In and One Out’ Rule: “I have a spending problem, which I’m tackling with baby steps. Right now, I’m trying to “maintain” with my one in and one out rule—if I buy something, I have to give a version of it away or sell it to make space for the new item. At first, it’s easy to replace old things. But once you start to over-shop, it becomes difficult to buy, say, new boots when you know you have two pairs that you don’t want to get rid of!” – Shirley, Boston, MA
11. Keep a Running Tally on Your Phone: “At the beginning of each month, I put the amount of spending money that I have budgeted into a note on my phone. Then, as soon as I make a purchase or withdraw cash from the ATM, I subtract that amount from the total. Since I know that I’m going to instantly see the total go down, I always take a second glance at the purchase to make sure that I really need it!” – Katie, New York, NY
12. Unsubscribe From Retailers: “I’m a big fan of online shopping, so to curb that habit, I unsubscribed from all of those weekly and daily shopping emails—no more Gilt Blasts, and no more messages from J. Crew. I also limit the amount of time that I spend on style blogs and retailers’ websites because even looking at clothes online can ‘trigger’ a spend.” – Alex, Atlanta, GA
How do you keep track of spending? What are your tips and tracks for a more financially responsible year? Tell us in the comments below.