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5 Steps to Spring Clean Your Finances

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After a long winter, many people give their home a thorough spring cleaning in order to start the season off fresh with a new perspective. This idea should apply to all aspects of your life, not just your home. By sorting through the financial clutter, you can better see where your budget strengths and weaknesses are in order to meet your current goals more effectively.

1) Emergency Savings

Every budget should make allowances for long-term savings, but few people are prepared in the case of an emergency. Check on your emergency fund and see how it's doing. Should you be adding more funds? Is there enough to pay for a common emergency, like time out of work because of an illness, or buying another car if yours should suddenly die from mechanical failure?

An unexpected crisis can derail your budget and set your financial goals behind by months or even years. Setting aside money to take care of life's little catastrophes can keep your budget right on track. It can also help you ride life storms more smoothly, worrying about the problem at hand, not how you'll pay for it.

2) Conduct a Budget Review

Every successful company undergoes an annual review to make sure that their expenditures are in line with their business goals. Your household budget could benefit from a review as well. Are there any spending categories that you regularly over or under spend in? You might want to adjust your budget amounts and categories to better reflect where your priorities lie and what your current financial goals are.

3) Adjust Your Retirement Savings

Studies show that less than a quarter of Americans are contributing to an IRA account for retirement. Many workers aren't even contributing the maximum amount to their retirement savings that their employer will match dollar for dollar. That's free money, folks. Talk about missed opportunities!

The earlier you save, the more you can take advantage of compound interest to grow your money. Now is a good time to figure out how much you can contribute out of your budget now to retire comfortably when the time comes.

4) Check Your Insurance Rates

Many consumers carry the same insurance policies with the same company for years without ever investigating their options. Gathering several life insurance quotes to compare can help you save big on your annual rates. Inspecting your home and car insurance policies can help you determine which coverage you may not need. Eliminating useless coverage and comparing the rates of multiple companies can save you a lot of money while still protecting your family and assets. If you find a cheaper rate, you might switch. If not, you'll have the satisfaction of knowing you are getting a good deal.

5) Start Saving Early

Christmas comes around every year and, for some, they end up in massive debt every January due to lack of planning. Setting a budget for each member of your family and saving throughout the year can keep you from either spending too much at Christmas time or increasing your debt by shopping at the last minute. Planning ahead also allows you to take advantage of sales through the year. By the time the Christmas shopping season begins, you may only need to buy wrapping paper.

Organizing your financial life is just as important as organizing your home. Taking stock of where you are and where you want to be is important for staying financially healthy. Failing to clean up your finances can not only cost you money, but also opportunities to meet your goals.

Jessica Bosari is a freelance writer and blogger for various publications and her own blog. You can read more of Jessica's work here. If you have any comments or questions about SavingTools or about saving money, leave your comments in the form below or email jessica@savingtools.com. Thanks!

 

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Comments

Re: 5 Steps to Spring Clean Your Finances

Thanks Jessica,
 
The earlier you save, the more you can take advantage of compound interest to grow your money.
 
Getting started early and stashing cash away at a regular rate over a long time period into a tax advantaged account (IRA/Roth/401k, 403b)  is the easiest way to save for retirement. Over a 45 year time horizon, if you save from age 21-31 and never save another penny, you can end up at age 65 with more than someone that begins at age 31 and saves the same amount until age 65. Imagine what happens if that savings period begins @ 21 and ends @ 65! 
 
It's all about the math. You remember math don't you?