Spring Clean Your Life: Step 9 – Shape up your Finances

Image courtesy of Teeratas / FreeDigitalPhotos.net
Image courtesy of Teeratas / FreeDigitalPhotos.net

We’re nearing the end of the “Spring Clean Your Life” series, and I hope that it’s been helping you to “clean up” several areas of your life. I know it’s helped me, and it’s something I will definitely plan to do every spring going forward. It feels so good to work on improving all aspects of my life. And now on to spring cleaning your finances. Perform the steps below to get yourself financially cleaned up and healthy.

Know where your money is going

Are you able to account for how much of your money is going where each month? If not, try tracking every expense for a month so that you can analyze exactly what you’re spending your money on. You may notice that you’re spending quite a bit of money in frivolous areas where you can afford to pare down.

I use this monthly spending worksheet from Frugal Living, which I keep in my Home Management Binder. You can also sign up for a website like Mint that links directly to your bank accounts and categorizes your spending so that you can see where every penny is going.

Update your budget

You may find after you have performed step one that you need to tweak your budget. Or maybe you didn’t have one in the first place. About.com provides a comprehensive, step-by-step action plan for creating your own budget–check it out here. You can also use this excellent worksheet from Frugal Living to write down your recurring expenses and draft your budget. You can also get a good idea of how your budget percentages should look by checking out this article from A Bowl Full of Lemons.

Check your credit report

You are allowed one free credit report from each of the three bureaus each year. Take advantage of this because according to the FTC 5% of consumers have credit report errors that could hurt them financially. Visit annualcreditreport.com for your free credit reports.

Save, save, save some more

If you do not have a savings plan, this is an absolute must. You NEED money to fall back on in case you ever lose your job, have a medical misfortune, need to fix a big-ticket item like your car, etc.

Opinions vary as to how much you should save per month–it really depends on your age, your income, and a number of other factors. But as a general rule of thumb, you should try to aim for 10% of your paycheck if at all possible. The Nest has a savings calculator that will tell you how much you need to save per month in order to reach a financial goal by a certain date.

I personally find that it’s easiest for me to save by having money automatically transferred from my checking account to my savings account each pay period. That way I don’t even miss the money. Plus, nowadays there are many options to set up  interest bearing savings accounts that help you to actually earn money as you save.

I also have a jar that I stuff all of my extra dollar bills in at the end of the day. You would be surprised at how quickly those singles add up!

Plan for retirement

Whether you’re 25 or 55, planning for your retirement is something that should always be front-and-center when budgeting and planning your finances. But you already knew this, right? Here’s  a list of the top 10 things you need to know as you plan for retirement from CNN Money. And Bankrate.com offers an awesome Asset Allocation Calculator that can help you determine how to create a balanced portfolio of investments. Check it out!

Meet with a financial advisor/planner

If you would feel more comfortable talking your savings, IRA contributions, and financial goals through with a knowledgeable expert, arrange for a consultation with a financial planner. Not sure how to choose one? Here are some tips from the Wall Street Journal. I think you will also find this article from Fox Business to be very useful; it explains the services that a financial advisor may provide, misconceptions about working with financial advisors, and when it’s “time” to meet with one.

Determine what to keep and what to trash

CNN put together a useful guide, which I’ve included below for your reference.

Keep for one year Paycheck stubs until you get your W-2 in January to check its accuracy
Bank statements to confirm your 1099s
Brokerage statements until you get your annual summary (keep longer for tax purposes if they show a gain or loss)
Receipts for health care bills in case you qualify for a medical deduction
Utility bills to track usage (seven years if you deduct a home office)
Keep for 7 years Supporting documents for taxes, including W-2s, 1099s, and receipts or canceled checks that substantiate deductions. The IRS has up to three years after you file to audit you but may look back up to six years if it suspects you substantially underreported income or committed fraud. Keep documentation for 2012 until 2019.
Keep indefinitely Tax returns with proof of filing and payment
IRS forms that you filed when making contributions to a traditional IRA or Roth conversion
Receipts for capital improvements that you’ve made to your home until seven years after you sell the house
Retirement and brokerage account annual statements
Receipts for big-ticket purchases for as long as you own the item, to support warranty and insurance claims
Toss ATM receipts once recorded
Bank deposit slips once the funds show up in your account
Credit card receipts after you get your statement, unless you might return the item or need proof of purchase for a warranty
Credit card statements that do not have a tax-related expense on them

Donate for tax deductions

Well, donate several reasons. Donate to clear clutter. Donate to give someone less fortunate than you the opportunity to get use out of something that you’re not using. But also, donate because you can get a tax write-off that will help you come tax time. Just be sure that you get a receipt for your donations stating the value of the items you donated and signed by a Goodwill staff member.

I know this seems like a lot of work, but don’t let it overwhelm you! It’s not that difficult and believe me you will benefit from setting up a financial plan and system that works with your lifestyle. I’ve included some more resource links below that I think you will also find very helpful as you spring clean your finances. Happy Budgeting!


Resource Links

Suze Orman’s (Ridiculously Easy) Financial To-Do List

10 Common Money Management Mistakes that you’re Probably Making

25 Simple Ways to Save

Get-Out-of-Debt Checklist

Crown’s Free Financial Publications

Suze Tools

Cool Infographic about Personal & Financial Spring Cleaning Benefits

Courtesy of credit donkey.com
Courtesy of creditdonkey.com

You may also be interested in:

Spring Clean Your Life: Step 8 – Attend to your Health

How to Make your own Home Management Binder

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