Our experts in credit counselling are big on spring. It’s a time that spells renewal and hope. It gives people encouragement to blow the dust off everything, get organized, and enjoy the sense of freedom that comes with making a fresh start. You know what I’m talking about. You may sweat a little getting down to work – sorting through and throwing out all the boxes and crap in the garage, the attics, the closets, the yard, what have you. But what a wonderful feeling it is when you get the job done. Relief, peace of mind, even joy can come from the effort. And guess what? You can really boost that sense of freedom by taking a little time to spring clean your finances too.
You don’t need credit counselling for that. You can do it all on your own, unless of course you’re facing debt problems and can use professional credit help, in which case Credit Canada Debt Solutions can assist you with your cleaning needs. For self-starters, here are seven soul-soothing tips that can help bring lots of summer sunshine into your financial life. Pace yourself. You don’t have to tackle everything at once. You should be able to accomplish all tasks listed here by setting aside a half a day or a day each week over the next month. Believe me, you’ll feel better for it.
1) Analyze your monthly budget. A monthly budget, set down in writing, is a given for any household. If you’ve got one, spring is a great time to review it - and if necessary update it – in a framework of past months and the months ahead. If you haven’t got a budget, now is the time to create one. Either way, you should closely review what money in your life is coming in and what money is going out. How do they balance against one another, and how do savings fit into the picture? Adjust your budget to provide the best balance, and consider any recent life changes that affect the process. Spending habits are vital in the review. A neat trick is to get a hold of a couple of different colour highlighter pens to mark up credit card and online bill statements from the past few months.
Using one colour, highlight your costs covering needs (rent, mortgage payments, groceries, toiletries, utility bills, insurance etc.). Then use another colour to highlight costs covering what are basically wants (travel, cable and Internet subscriptions, impulse purchases involving maybe candies and magazines, gadgets, fancy clothes, bar and dinner tabs etc.). This process can be quite eye-popping. Those new to it are often stunned by how much they are spending without thinking. Try not to make your budget review a tiresome job. Before you even start the process, revisit or set down the short-term, mid-term, and long-term goals in your life. The truth is, behind every budget are spring-like hopes and dreams that give you the energy and spirit to make and manage money to begin with.
2) Evaluate your debt load. What do you owe on your credit card and other loans, and what are you forking over to lenders in interest? Of course, your debt has a huge bearing on your budget and the way you live your life. Do you know what you’re paying on interest over time? If not then try Credit Canada’s debt calculator to learn how compound interest affects the time it takes to pay off debt. Comparison shop what you’re paying in interest. Look into credit alternatives available to you through various financial institutions. Think about refinancing your mortgage or asking your credit card company for a lower interest rate.
Meanwhile, if you’re behind the eight ball on finances, cut up your credit cards – or at least reduce your cards to just one. If you’re feeling trapped regarding money, consider getting advice through professional credit counselling or a good financial coach at Credit Canada.com. Always remember, options are available to consolidate debt with affordable monthly payments where interest is reduced or even forgiven. Spring also is a good time to review your credit report and credit score, which are ready for viewing through either of two credit bureaus in Canada. Go to Equifax Canada or visit TransUnion Canada for information that’s available either for free or for a small fee.
3) Clean up your files. Tidy up your accounts. Be ruthless. Consolidation loans lower interest payments and are worth exploring, and toss out old accounts, cheques, and statements. Do you really need multiple bank accounts? Dump ‘em. Shop and compare bank services. Get a new bank – or consider the benefits of a credit union - if you’re unhappy with your current financial institution. Also, put an end to any online accounts or subscriptions that aren’t being used or that aren’t worth the money. While dumping stuff, some care is required. The general rule is to keep tax info from the past seven years. Save credit card and bank statements for no more than a year. Obviously, for tax deductions, keep all receipts for charitable contributions for the seven-year period.
4) Set up automatic payments. Automatic payments make life so much easier, and they can help with savings big time. To avoid temptations for spending and to build savings, arrange to have money automatically taken out of every paycheque you put in the bank. Automate bill payments. If you already have automatic deposits for an emergency fund and retirement account, you’re one smart cookie, especially if you’re making an effort to increase contributions.
5) Go Paperless. Mother nature will thank you for this. And you’ll thank yourself for removing a lot of paper clutter from your life. Except for maybe tax receipts – which can be numerous and complicated - scan all important documents and store them digitally with backup files. Also, with so much business being done online these days, info relating to bank statements, credit card statements, and billing statements can easily be copied and filed.
6) Revisit your insurance. Take inventory. Take another look at your homeowner’s (or renter’s) and car insurance policies. Assess premiums, deductibles and coverage, especially if you’ve got a family to protect. Again, consider comparison shopping for better deals. No one who can afford it should be without homeowners or renters insurance. And no one should take out insurance without having a household inventory of all possessions. Take photos of everything. Make lists identifying the known or approximate value of all items. An inventory will make it much easier to replace stuff in case of trouble.
7) Make an ICE file. ICE means In Case of Emergency. God forbid, but should you suddenly leave this world or become incapacitated, your affairs will need to be put in order, and surely you don’t want to leave your loved ones scrambling to figure things out. So an ICE file is crucial. It should include all the information necessary to managing your finances. Account numbers, online login IDs, passwords, billings, investment info and more need to be put into a file that is readily accessible in the event of an emergency. Also, review your beneficiaries. Spring has sprung with Easter almost upon us. So hop to it with your financial spring cleaning. Trust me, it feels like sunshine.