Financial spring cleaning in five easy steps
Spring is…here? Coming soon? Never coming at all? It’s hard to tell what spring is up to this year, but regardless now is a great time to do some financial spring cleaning.
Almost all of that probably sounds pretty dreadful, but it doesn’t have to be! Spring cleaning is all about clearing away the dinge and the dirt and the dust that’s accumulated over the course of a long, cold winter. When you’re done, you’ve got a fresh, clean house and a palpable sense of renewal.
Financial spring cleaning is just like that. It’s all about clearing away the clutter and the cobwebs and getting reenergized about your goals and your financial future.
Nothing dreadful about that, right? So let’s begin!
Pull your credit report
You’re entitled to a free copy of your credit report from all three major reporting bureaus every 12 months. If you haven’t been pulling your report regularly now’s a great time to make it a habit. Why?
- Fraud detection – If your identity is compromised, there’s a good chance you won’t know about it. At least not initially. That’s why it’s so important to pull your credit report regularly. Entries that might seem like errors may be signs of identity theft.
- Impact on your credit score – Credit reporting errors happen with more frequencies than you’d imagine and errors on your credit report can be costly. The score reduction cause by errors can cost you in higher rates, bigger insurance premiums, and more.
- Financial pulse check – Your credit report contains all of the debts currently listed in your name. In the spirit of financial spring cleaning, it’s a fast way to gauge how much you owe and what kind of progress you’ve made.
Review your financial goals and your progress towards those goals
Do you have savings goals? Debt-repayment goals? Now’s a great time to take those goals out and see how you’re doing. Are you where you thought you’d be at this point? Ahead of the curve? Behind the curve? If you’re behind, what are the things that are knocking you off-track? Are your goals still important to you? Are there new goals that make more sense for your present situation? Think about all of these questions and try to find answers. Spring cleaning is a great time to start making some financial course corrections.
Review your spending
One financial pitfall a lot of us fall into is habitual spending. And by that, I don’t mean that you’ve developed a spending problem, but that the way you spend is motivated more by habit than by active thought. We buy certain products out of habit. We continue to use the same services because we don’t see an obvious reason to do otherwise.
Financial spring cleaning is a great time to think about how and where you spend money. Are the regular money choices you make really in your best interest? Are there better options available? Think about things like your utilities – are you really getting the best deal available? Are you paying for things you don’t need or use? Now’s the time to clean house and start actively seeking out better deals for yourself.
Reset your goals and priorities
Once you’ve reviewed your credit report, your personal financial progress, and your spending habits, it’s time to hit the reset button. What you’ve already done can tell you a lot about both your goals and your priorities. Primarily it can tell you whether or not those two things are aligned, because if you’re not making enough progress towards your goals than your priorities might be pushing you in a different direction. You may need to tweak one or both of those to get you moving in the right direction.
Create a new plan and a new budget
Now that we’re a little bit clearer on what’s important and what we really want to accomplish, it’s time for the final piece: a new plan of attack. The good news is that doesn’t really have to be all that different from your old plan of attack. It’s just a matter of taking what you’re learn by reviewing where you are and what you’ve done and making the tweaks necessary to push you towards your goals.
Your financial wellbeing is a marathon. It’ll run you through valleys and peaks, with a lot of sprawling flat land in between. How fast and how far you’re able to go comes down to the little improvements you make along the way. Learn from what you’ve done and you’ll get better. Just like that.
Now let’s start cleaning!
Need assistance making sense of your credit report? MMI offers Credit Report Reviews - our trained counselors can pull your report and explain what it all means. Best of all the service is free! Check out our Credit Report Review page for more information.