If you’re like most Americans, you may struggle to stay on track of where your money is going every month. But now that it’s springtime, we’re pushing the curtains aside to let the sun in and see a little clearer. Here are 5 things you can do right now when spring cleaning your finances to set yourself up for a bright spring and an even brighter financial future.
1. Track Your Spending
One of the simplest ways to spend less money is to know where you’re spending it. Take a look back over the past few months. Are there any numbers that may come as a shock? Maybe you spent more on take-out than you realized in January or you lost track of how many packages you’ve ordered for yourself. Whatever it is, it’s important to acknowledge where you can improve your spending habits in the future.
Set a goal to keep track of all the money you spend for a month. No two people are the same and where one person may prioritize spending in one area, another person may prioritize something completely different. These values can also change from month to month or season to season, so it’s important to recognize what’s important to you at this point in your life and where you are comfortable spending your money and where you are able to save a bit more. Tracking your spending when spring cleaning your finances can help you recognize these priorities better.
2. Catch up on Debts and Late Payments
Now that you’ve taken account of where your funds are going every month, you can consider any outstanding payments you have and can start to shift your focus to paying down those bills. Is there a credit card bill you’ve put off? Medical expenses you’ve been ignoring? Whatever it may be, now is the time to think about getting squared up. Create a plan and timeline for getting on top of your bills and taking back control of your budget.
3. Create a Budget
Whether it’s your first time creating a budget or you just need to make some adjustments, there are certain steps to ensure you are setting yourself up for success. To start, create a list of your monthly bills and your monthly pay stubs and compare them side-by-side. In order to create a healthy budget for yourself, subtract your monthly expenses from your monthly income amount. If you find that that number is zero or less, you may be spending more money than you make. This means it’s time to make some changes to your budget.
Using your existing spending habits and monthly income, you can break down what you want your budget to look like. Make sure it’s realistic and one you know you can stick to. A budget that’s too strict or different from your current one will be difficult to maintain in the long run. So be honest with yourself about how much you can cut back. Your budget should work for your lifestyle, while also encouraging you to practice better spending habits.
4. Build Up Your Savings
There’s no better time than the present to start saving up; and that’s even more true when you’re spring cleaning your finances . Now that you have re-evaluated and readjusted your spending, it’s time to start considering how much you can realistically add to your savings every month.
Start creating an emergency fund for when unforeseen circumstances arise. No matter how big or small your monthly contribution is, it’s important to have something to fall back on and will potentially save you from having to take out a high-interest rate loan that could take a long time to pay back and negatively affect your credit.
Along with your emergency fund, it is helpful to also work on your general savings to better ensure your financial security in case you face a job loss or other changes in your income.
Even small amounts can add up. When you forgo your morning coffee shop trip, that’s a few dollars that can be added to your savings. Even pocket change can lead to significant savings over time.
5. Turn to Home Equity
Does it feel like no matter what you do, you just can’t get ahead of payments? If you’re looking to breathe new life into your finances, there are other solutions that can get you the cash you need to get ahead.
- Personal Loan – This type of loan is borrowed from a bank or lender and paid back in fixed monthly payments, or installments over several years. It is not secured since you’re not using your home as collateral, which means the interest rates are often higher than with home equity or other secured loans.
- Home Equity Loan – This is a loan that uses your home as collateral. It borrows against your home’s equity. It is a fixed-rate loan, as is the repayment of the loan term. You’ll make the fixed monthly payment on the home equity loan just as you would on your mortgage.
- Refinance – This is essentially a new mortgage that replaces your current home loan at a balance that’s higher than your outstanding one. It lets you access the equity you’ve built up in your home by cashing out the difference between the two mortgages. You can use the money toward home renovations, consolidating debt, and more.
- Sale-leaseback – This is an alternative financial solution for homeowners. Instead of a loan, a sale-leaseback is when a customer sells their house but continues to live there as a renter. The customer is able to convert their equity into cash from the sale, and receive a lease, giving them time and money to figure out their next steps.
If you are looking to get your finances back on track but are tired of getting disqualified by banks and lenders for traditional methods of financing, a sale-leaseback may be the solution for you. Spring is the time to start cleaning out your finances and making room for a fresh start to your budget and funds. If you’re in need of alternative financial solutions, contact a financial advisor so you can explore your options to plan your future and reach your financial goals.
If you’re looking for options to do some spring cleaning on your finances, there are may options for you to set you on the right track for a brighter financial future. If you are still unsure of options to clean up your finances after reading this article, consult a financial advisor to discuss your options.