When I was young, my mother made my sister and I complete the ritual of spring cleaning. We’d pack up our winter jackets and exchange our sweaters for shorts. We’d dust every possible surface, lifting up each knickknack and pulling out every book. Windows were opened and the stale air of winter was pushed out and replaced by the fresh, clean smells of spring. After a few days the house would shine; even though it was hard work, it was worth it. We had the feeling that we were starting something new, something that was worth the effort.
Now that I’m older I not only clean my own house but I do a thorough spring cleaning of my budget. Obviously a budget is different than a house. You can’t just dust off all of those knickknacks and put them back where they were. A thorough spring cleaning of your budget starts with reviewing your last year’s finances and learning where you can (hopefully) trim the fat.
First, visit annualcreditreport.com. Each year you are entitled to one free credit report. Look it over carefully and make sure that nothing stands out or that you have no unexplained accounts open.
Reviewing last year’s spending used to involve going through pages and pages of bank statements. But, thanks to all of the new online budgeting tools, that’s a thing of the past. If you’re not using an online program yet, you might want to start. I recommend one that will separate all of your spending into different categories (such as rent, clothes, car, etc). And that will let you change the time period you are viewing. This makes looking at your past year as easy as clicking a button.
Once you know your spending then you can begin to cut. First, make a list of all of your regular bills. I have gas & electricity, cell phone, cable, health insurance, car insurance and my mortgage. Go through a few copies of each bill. Most providers now offer your old bills online. Look for services that you no longer use. Everyone needs heat but maybe there are some ways that you can cut down on your heating costs. Think about getting all of your bills online; this is safer, you won’t have to worry about not receiving your mail or having someone pick up a piece of paper with your personal information on it.
If you do have a big stack of papers, shred them. This is very important. Do not throw anything away. Identity thieves are just waiting for you to make a mistake like this.
After you have examined your “basic” expenses, look at the things you might not need at all. Do you have a website that you are no longer using? Cancel it. Membership to a discount store that you no longer shop at? Cancel it. Still have a gym membership that you never use? That’s right, cancel it.
Next, take a look at what you are spending on restaurants and clothing. Can you bring your lunch to work? Can you make coffee at home in the morning instead of visiting a Starbucks? Are you really wearing all of those new shoes you keep buying?
Millions are wasted each year in late fees. An easy way to correct this is to set up automatic bill pay. Either use your bank’s auto bill pay function or go straight through the biller’s website. Bonus: you’ll save on stamps!
Many of us are living from paycheck to paycheck. Even if that’s the case you can still save a little bit. I have my bank take $25 out of my checking account each month and transfer it to my savings account. It’s not much but at least I have some money in savings that I don’t think about. It’s such a small amount that I really don’t notice it. Having my savings account attached to my checking account gives me a cushion to protect against overdraft.
If you can follow a budget and make some cuts you’ll soon find that you have extra money. If you are not yet using some sort of money management tool you might want to add that to your to-do list. Just make sure that the software you choose is free—the idea is to cut expenses, not add to them.
Next: Check out this list of expenses. Can you cut back on any of them?