Spring is a time for new adventures, habits, and goals – and your finances play a big role in all three. Getting your finances aligned doesn’t need to be a daunting task. Here are five easy steps to help you dust off your checkbook and clean up your budget.
Maybe you've been turning a blind eye to the status of your bank accounts lately. If this is the case, taking an initial look at your current income, spending habits, and savings can be stressful. But if you don’t look, you won’t know what to fix.
Understanding what accounts you have, the status of those accounts (including the balance), and your cash flow all help you get an accurate picture of your debt-to-income ratio. Your debt-to-income ratio is a comparison between how much money you owe versus how much you earn. By reviewing your accounts, you can reassess your budget to ensure you're accurately planning for the future.
Checking Your Balance: A Timeless Practice
Now with a better idea of what your finances look like, you can focus on goal setting. Creating SMART (specific, measurable, attainable, realistic and time frame sensitive) goals can help you be most successful in this step.
Ask yourself what you’re saving for, and get aspirational! Do you want to go abroad? Is there a splurge purchase you’ve always wanted to make?
Whatever your goal may be, follow each rule within the SMART framework. This approach lets you focus your attention on deciding what percentage of your finances will be necessary to accomplish each goal, if it’s possible, and when you’ll achieve them.
This will quickly reveal the difference between the goals you can shoot for realistically and others that may need more planning. Try writing down a few goals today and working through them with this system. You might be closer to reaching them than you think.
For more long term financial goals like a house down payment or building up an emergency fund, a trusted financial advisor can help you understand what’s feasible for your situation.
You have your income and goals ironed out, and now it’s time to check in on your financial distribution. Where does your money go? Do all of your deposits go into one account? Does any of your paycheck get automatically put into your savings?
An effective saving tool is having separate accounts for each goal. If you receive a consistent paycheck, allocate amounts from that income to each account. This saving strategy doesn’t take much thought on your end, and will lead to steady account growth. Even if you can only put $10 away per week, this adds up over time.
A bonus? By setting aside part of your paycheck, you can more effectively save for a purchase or help you more efficiently pay down debt.
With online banking, you can automate your bill payments, receive eStatements, and set up balance alerts to keep close tabs on your finances. You can also download the mobile banking app on your smartphone to stay up-to-date on any automatic deposits or withdrawals.
The ability to automate more of your finances puts back more time in your schedule and helps you stay ahead on financial responsibilities.
How to Practice Financial Self-Care
Some payments, like housing costs, car loans, and utility bills, are non-negotiable. When spring cleaning your finances, take a look at how much your “needs” total for you. Are these expenses sustainable long term? Or is it time to re-evaluate spending habits to establish stronger financial fitness?
From here, you’ll want to look at “want” expenses and ask yourself if there are wants that can be reprioritized. Do you really use that subscription service? Are there instances where you can dine in as opposed to ordering takeout? You’ll be surprised how much you can save when you skip Friday pizza night.
If you’re in a relationship where you may have joint expenses, your partner may have different ideas of what constitutes a “want” vs “need.” Concentrate on the goals you agree on through an open and transparent conversation. If you’re struggling to find a middle ground, a financial advisor can help.
Get Started on Spring Cleaning with Our Financial Goals Worksheet
We hope you never need it, but in case you do, it’s recommended to have three to six months’ worth of living expenses set aside that you can quickly access from a savings account. That way, events like a job loss, serious illness or a major home repair are less burdensome because the extra expenses are more easily covered.
Spend some time making an inventory of your possessions, as well. You can create digital documents with photos and descriptions of your belongings that will provide a reference for insurance agents in the event of a disaster affecting your home. You should make at least one copy of the documents on an external hard drive you can either place in a fireproof safe or store in your safe deposit box.
Planning for a financial emergency may also save you and your family from unnecessary stress. Updating your beneficiaries on insurance, retirement and trust documents, creating or changing your will, and naming your financial power of attorney are all important steps to help protect your loved ones in the event you are not there to protect them.
This may seem like a lot of work, but giving yourself peace of mind is easily worth the time spent.
Clean Finances Year-Round
Spring isn’t the only time to clean your finances. Just like cleaning a home, keeping tabs on your situation and making necessary changes positively impacts your situation long term. The best outcomes result from monitoring budgeting and saving habits year round, and it’s never too late to start.
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Rockland Trust Online Banking gives you a variety of services that help you use and manage your accounts, whenever and wherever you want.
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Rockland Trust makes it easy to manage all of your accounts with our simple online portals.
Rockland Trust gives you a variety of services that help you use and manage your accounts, whenever and wherever you want.
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