Spring is here with flowers and sunshine! With Spring fever in full swing, and as we clean up our homes and yards, we should clean up our finances too! The changing season is a good time to evaluate budgets and spending plans to become financially efficient.
Whether you have a lot of debt, just owe a small amount or anywhere in between; let’s spring clean! Let’s get rid of those services we don’t use, pay off our debt and get our savings going.
Services we just don’t use
I know you are thinking: “This isn’t me, I don’t have any services I don’t use”. I almost believe you. I thought the same thing about myself. Here is how I found my service that is no longer needed: Search for it. Start by gathering all of your bills. Yes, every single one. Now pretend you are NOT you. Pretend you are an auditor who is going to find a useless expense and question everything, be honest with yourself. If you haven’t used it in the last 3 months, do you need it? Are there charges from vendors that are not required for the account? Do you lease a modem for your internet service? How much does it cost to buy one? Here are a few more items to consider:
- Are you using that membership you pay for each month or each year?
- Do you need all those cable channels or do you need cable at all?
- Are you reading the magazines you get? It’s better to cancel now than forget and be automatically renewed.
- Closely review your phone bill. Do you have services you don’t use?
- Are you sure you’re getting the best insurance rates? It might be time to shop around.
Pay off our debt
Remember in elementary school, there was a fourth grade bully, Sam, who picked on the first graders? We would tell him, “Hey! Pick on someone your own size!” Of course he wouldn’t pick on someone his own size, because that wasn’t easy.
What does this have to do with debt? Well, we can take a lesson from Sam the Bully (Yes we remember you all these years later) about paying off debt. If you ask an accountant about how to prioritize paying debt off, a typical answer would be to pay off whatever account has the highest interest rate. Financially that would make the largest impact. There is just one problem… A lot of the time the account with the highest interest rate may have the highest balance. We need motivation. If no immediate results are perceived we can become discouraged. So, pick on the little guy! Yes, we need to become Sam the Bully and take on the small balances. It’s easy and when you take even just one out, you will be free of an obligation! You can then use the money from that account to pay other accounts faster. This will motivate you to continue and maybe even further motivate you to find more ways in your budget to take down the little guys faster! After one is down, work your way up!
Start saving now!
It seems counterproductive to save money if you’re in debt. You pay interest on the balance of the accounts and any money sitting in a savings account, if applied, would lower your interest expense. Why have a savings at all? Because the unexpected will happen! The unexpected will appear suddenly with all its ugliness. We have to plan for it today! If you have no savings and an unexpected expense comes up, you may pay a lot more to finance it than if you saved for it. If you have no savings now, try to get to $100 as quickly as possible. Then try to get to $500. If you’re in debt try to get to 1 to 3 months of expected expenses. This will help if you have an unexpected loss of income. After you are financially free, save 3 to 6 months for an emergency savings. Also keep this in mind: For every $10,000 a year you make, it will take one month longer to find another job at a similar pay rate. If you make $50,000 a year you should plan to be job hunting for at least 5 months.
Get in the habit of saving. If your budget is so tight that you can’t afford to save, save $1. By getting yourself in that habit, once things change, you will be saving more. It’s hard to break a habit. Start saving today!
What is next?
So you’ve reviewed your accounts for unused services, have a solid plan to pay off your debt and are on the road to a reasonable savings goal. Financial spring cleaning is done! You are free to enjoy some lemonade and appreciate the spring flowers! Did you remember to account for the additional air conditioning costs coming up in a few months?
AFCPE Accredited Credit Counselor
15 years experience