Four (4) Tips on How to Spring Clean Your Finances
- Studies show that only 24% of millennials understand the basics of personal finance.
- April is financial literacy month, and it is a great time to learn more about money and take control of your finances.
- Organize, declutter, and get educated to live a better life financially.
According to a National Financial Capability Study, only 19% of millennials answered 3 out of 5 questions correctly when questioned about basic financial literacy. Lack of financial knowledge may be a contributing factor to the fact that, as of 2021, the average millennial consumer debt is well over $27,000.
Studies on financial education show us that many people consume debt without understanding the true concept of how money works. Without the proper education, we dive further into debt. Financial stability begins with educating yourself on the power of money and how to make money work in your favor.
April is National Financial Literacy Month, which is designed to bring awareness and education to people regarding money. In addition, it is a month dedicated to teaching others true financial stability to live upon for a lifetime for themselves, plus create generational wealth for the next generations of their family.
An excellent way to celebrate National Financial Literacy Month is to spring clean your finances. So that means out with the old and in with the new.
Here are four financial spring cleaning methods to better the next part of your money journey.
- Review Bank Statements
- Set Financial Goals
- Cancel Unused Subscriptions
- Payoff Debt
Review Bank Statements
The first step is always the hardest, but it is crucial in your financial journey. It is impossible to know where your money is going without having a statement to look back on.
Take the time to look over your bank statements from the last month or even the previous quarter. Find out what purchases and where you spent most of your money. Also, pay special attention to if there are any overdraft fees, interest charges, or any other negative items that would appear on your bank statement.
Knowing where your money is going helps you create practical goals to better your financial health.
Recommended Read: Challenges Faced by the Unbanked, Underbanked, and Financially Excluded
Set New Financial Goals
After you have overlooked your bank statement, it is time to set new financial goals. Be as specific as possible when writing down these goals.
Aside from writing down goals, keep them in a place where you can see them every day. Whether being attached to the mirror or near the coffee pot, being at eye level helps you to stay on track. There will be times when life gets the best of you and you need a little motivation. With these goals being out in the open, it is sure to give you the push that you need to keep going.
After reviewing your bank statements and writing out your goals, you can then proceed to create an action plan. To complete the plan, you will need to ask yourself where you can cut expenses, or it may be that you conclude that you need to increase your income.
The combination of making more money, spending less money, and investing the difference is key to financial stability.
Recommended Read: How to Earn More Money and Stop Pinching Pennies
Cancel Unused Subscriptions
According to MarketWatch, 1 in 10 millennials spends somewhere around $200 per month solely on subscription services. Small amounts tend to get overlooked until you look back on bank statements and add them up. A $12.99 subscription here and there can amount to big bucks after a while.
Recommended Read: Save Money by Canceling Unused Subscriptions
Beware of free trial marketing tactics, as they are keeping you in debt. Companies set up subscription trials to entice you to sign up for their services. They offer free trials in exchange for your credit card information and e-mail address.
If your trial isn’t canceled within so many days, the service will charge your credit card for the subscription. Some companies go as far as making it extremely difficult to unsubscribe once you have signed up. The key is to read the fine print and understand what you are signing up for from the beginning.
There are many methods to help you pay off debt. Of the various options, debt snowball and debt avalanche are two of the most popular.
The debt snowball method is when you pay the minimum on all of your debts besides the one with the smallest balance. You take the one with the smallest balance and put any extra funds towards the debt to pay it off faster. You will then work your way through your debt until you get to the last debt payment with the highest balance.
The debt avalanche method is just the opposite of the debt snowball method. It is when you start paying off the highest debt and make minimum payments on all other small debts until they are paid in full.
It is important to celebrate along the way instead of waiting until all debt is paid off to celebrate. Waiting can cause you to end up back at square one and head over heels in debt as you have overspent due to your emotions.
Recommended Read: Should I Consolidate My Credit Card Debt?
The Money Wrap-Up
When it comes to spring cleaning your finances, ensure that you are spring cleaning your mind too. Get your finances in order and pay off debt with the intent of staying out of debt.
Set goals that go beyond paying off debt. Take your extra money and save or invest it to make more money. For example, assign each dollar that you earn a name to help to decrease spending as a whole.
Keep in mind that no one is born financially literate. It is all taught to us over time. So start with what you know and educate yourself even further along the way.
What is one tip that you will be using to spring clean your finances? Comment below.