Financial spring cleaning
Written by Sarah Milton
Rearrange Your Goals
Given that research suggests that most of us will have abandoned our new year’s resolutions by mid-February, spring is a great time to revisit our financial goals and get back on track. One of the key components of successful goal setting is having a strong motivator; too often we set goals because we think we “should” do something rather than because we actually want to. Without a definite reason to save or to eliminate debt or to learn more about investing, it’s unlikely that we’ll stick at working on our goal long enough to achieve it. If you find that you keep setting the same goal over and over again and never making any significant progress towards it, it might be time to either give up on it completely or to find a solid reason to work towards it that actually motivates and inspires you to keep going.
Declutter Your Payments
Often when I meet with clients and we go through their statements, there’s at least one monthly payment that they’ve been meaning to cancel and never got around to. It might be a subscription to a magazine that you never have time to read, a monthly membership fee for a gym that you aren’t taking full advantage of, or one of those insurance policies that your financial institution persuaded you to take on a 30 day free trial and you forgot to cancel. Whatever it is, taking 15 minutes to review your statements and another 30 minutes to make some phone calls could save you a significant amount of money each month; money that could be “repurposed” towards a financial goal or that could be used for something that you’ll actually use and/or enjoy.
Tidy Up Your Spending
A spending clean up can be a powerful way to channel more of your money towards the things that matter most to you. Doing a clean-up of your spending means taking a look over your statements and finding all the places where your money is “drifting”. This drift might be the result of any number of things. For example: overspending at the grocery store, picking up lunch or coffee on a too-regular basis, random purchases of things you didn’t really need or too many cash withdrawals from the ATM. David Bach coined the phrase, “latte factor” to describe these small purchases that can add up to hundreds of dollars each month if we don’t pay attention to them. It’s not that treating yourself or indulging in the odd splurge is a terrible thing but the trick is to make sure that you’re using your “fun money” to pay for those things and not money that you might have intended to use for something else.
Try a Money Cleanse
If you find that you’ve got too much money drifting away each month, why not try a 28 day financial cleanse? Science suggests that it takes 28 days of consistent action to create a habit (good or bad) so taking four weeks off from random spending and trying really hard to develop (and stick to) a consistent spending/saving pattern can be a really powerful tool when it comes to taking your finances to the next level. The first few days are the hardest but if you can make it through the first week there’s a good chance you’ll be able to see it through all 28 days. Remember that the point isn’t to deprive yourself of everything that’s fun; that’s a sure-fire recipe for disaster in my experience! Rather, it’s about creating a balanced approach to spending and saving so that you can enjoy your money without overspending and ensure there’s enough left over for the future.
Effective money management hinges on building your understanding of basic money principles and creating simple systems that help you live within your means and pay yourself first. Taking a few hours every few months to check-in on those systems and make sure your spending habits aren’t slowing you down is a time investment that’s definitely worth making. If making some changes to your finances is something you’ve been meaning to do for a while, then why not take some time this week to think about what you could do to help spring clean your finances?