Each year, Calgarians are revitalized by the melting snow, and the warm sun. It’s spring, which means we’re getting motivated to work around our homes, get outdoors, and be more productive. You’re thinking about Spring Cleaning, but have you thought about Financial Spring Cleaning? Whether you’re hands-on with your finances, or they’ve been neglected, take a minute to go through this guide and get your finances set up properly for the upcoming year.
This guide is also great for any young adults just starting out on their own, so share this article with them to help them organize their finances!
Set Up A Personal Filing System
In this internet age, it’s very easy to keep track of your personal finances. All you need is your smartphone or your laptop and everything you need is right at your fingertips. If you get your bills digitally, using your computer to keep track of your finances will be easy. Keep the bills in clearly labeled folders on your desktop.
If your bills come by snail mail, you can usually request a digital copy from the service provider directly or by signing up for ePost (Canada Post’s digital mail service). Another alternative is to take a photo of your bill and upload it to a secure cloud app like iCloud or Dropbox. If technology really isn’t your thing, the best option is to create a physical folder that will hold all your bills.
Organizing your bills in a single location will help you avoid missing payments. In the event of a bill dispute or your next credit application, it will also ensure you have all the files you need handy. Missing your bill payments can have profound effects on your credit score. Learn more about taking control over your credit score.
Create a Budget (& Stick To It)
When creating a budget, it’s a good idea to make a spreadsheet, and to use a budget calculator. The first thing you need to record is your annual salary, or your hourly wages and how many hours you work a week. Then, track your spending. Each time you make a purchase, write it down or add it to your phone. Your purchases will come through on your debit or credit card, so you can record them at the end of each day. Once you’re aware of how much money you spend on, say, coffee? You’ll know whether you can afford that $5 latte every day.
On your spreadsheet, keep track of your bills such as your rent, utilities, phone bills, groceries etc. One of the most important things you can do is to stick to your budget. This can be challenging at first, but once you’re used to keeping to your budget, you’ll be more comfortable knowing where your money is coming from, and where it’s going.
When doing your Financial Spring Cleaning, it’s important to track dates in which your money is coming and going in your bank account. Each payday should be recorded and each pay stub should be kept in your financial document folder. This will help you understand where your money is coming from, how much you are paying in taxes, and how much vacation pay you are accumulating.
Setting up automatic payments is a very beneficial tool that many people use. This will ensure you don’t miss a payment, and you won’t have to scramble to get money together.
If you’re uncomfortable setting up automatic payments, set a reminder in your agenda or on your phone to pay your bills. When you have a payday, use a reminder that prompts you to pay your bills immediately before anything else. Once you’ve got into the habit of paying your bills immediately, you will feel much more free with your personal finances.
Pay Off Your Debt
Along with all your bills and expenses, there is the question of any debt, or loans you might have. Whether it’s your mortgage or your student loan, paying off debt is key to ensuring a healthy financial lifestyle.
First thing is first, make a plan! Seek help from a financial advisor, or from your mortgage broker if it’s your mortgage loan in question. Paying off debt is essential in maintaining a good credit score, and ensuring that your money is spent smartly.
Save Your Money
If you don’t already have a savings account – go get one. Having money in your bank account is incredibly important just in case of emergencies. Potential financial emergencies include job loss, reduced hours at work, illness, home or vehicle repairs, or even that “emergency” vacation fund. It’s possible to set up your bank account to transfer a certain amount of money into your savings account each time you get a pay check. When your bank account transfers money automatically, you won’t even notice the transfer. Even as little as $10 a month will result in saving $120 a year which is better than nothing!
Lastly, try not to resort to your credit cards unless you can pay them off immediately.
The Golden Rule of Finances: Do not spend more than you earn.
Remember that your credit cards aren’t magical, you need to pay them back. When your credit card bills come in, the minimum payment must be met. However, you should practice paying off your credit card in full each month.
Now it’s time to start your Financial Spring Cleaning journey! Remember to track your spending, budget, and set up automatic payments and transfers for your finances.
Pass this along to any young adults who need a little help organizing their finances!