It’s official, the heat of summer is in the air. Or at least it feels that way in many parts of the country. When the heat is at its highest, it’s a fine time to stay inside and do a little “out with the old and in with the new!” Plus, Netflix’s organizing phenomenon, “Tidying Up with Marie Kondo,” has people cleaning out every drawer, closet and room in the house. It’s time to do a little of the same with your finances.
Here’s three easy steps to tidy up your finances this year:
Tip #1 – Get it all out in the open.
Much like Kondo’s suggestion for how to sort through clothing, you should find every piece of financial information you have from debts and savings and put it all in one place for review. You may want to use a net worth worksheet to jog your memory about accounts you may have forgotten about.
If you are married, or financially tied to anyone else, try this exercise with your spouse or partner. The net worth worksheet can also help you plan. If your net worth (liabilities minus assets) is a negative number, you may want to focus your goals on paying down debt.
Find more on net worth worksheets here.
Tip #2 – Track your spending.
Now that you have a full picture of what your finances look like, you can take a good look at your daily, weekly and monthly spending. Tracking your spending is the best way to do this, and it can be done in one of two ways:
- Start on a specific date and track everything you spend for 30 days; or,
- Take a look back at the last 30 days so you can review your spending and organize it into categories.
Use an expense tracking sheet to help you. Many people prefer Excel documents, and two great examples exist at https://www.vertex42.com/ExcelTemplates/expense-tracker.html or http://www.mediashower.com/img/2238/simple budget template.xls.
There are also a multitude of apps that help with tracking, such as Wally, Mint, Mvelopes or YNAB (You Need A Budget). Tracking your spending leads to the next step of budgeting.
Tip #3 – Budget for and set goals.
Tracking where your money goes should lead to a spending plan or budget. Whatever you decide to call it, the end goal should be that you need to decide where you want to spend your money.
For example, if you track your spending for 30 days and realize that in one month you spent $200 on eating out or $400 on shopping (for non-essentials) and those amounts are not how much you would like to spend, then you should adjust your spending to your budget.
This is also where goals come in handy. If you have a goal of paying down debt or saving for a purchase, then adjusting your budget may free up some money to put toward those goals.
TIP: MilitarySaves.org has some great goal-focused plans to help get you started.
There are many useful ways to cut corners, spend less and make more. Share ideas with your friends. See who can save the most on get-togethers and parties. Start a couponing club. Groceries are a huge expense and getting together to share coupons can make it a fun way to save money. After all, think of all the possibilities this year can bring by freeing up money for things that will really spark joy.
What is one financial goal you have set for the remainder of 2019?
