Spring Cleaning for your Finances
With winter behind us, many are taking part in their annual “spring cleaning” rituals. Time to clean out the garage, freshen up the garden and maybe even hold a yard sale to get rid of the items you no longer need.
And while you might be planning to spring-clean your home or wardrobe, why not take a fresh look at your finances too? For this week’s column, I will share six tips for freshening up your own financial well being:
1. Create or update your budget – There is no way you can take control of your finances if you don’t know what it costs you to live each month and what each of your expenses are. Creating a budget may seem daunting but once you start, you’ll likely be surprised how easy it can be.
2. See what you can cut out – Once you have a budget in hand, review each monthly expense to see what you don’t really need. Are there services that you pay for but don’t use? Can you cut your TV subscription from 200+ channels to a more basic package? Any subscriptions that you can cancel? You might be surprised how easy it is to free up an extra $100/month!
3. Take control of your debt – The only way to tackle debt is to create an honest an accurate accounting of how much you owe and to who. List your debt balances, interest rates and lenders in a spreadsheet and confirm what the minimum payment is on each account.
Then figure out how much you can afford to pay towards the debt each month. With that amount in hand, pay the minimum only on each debt and put the balance leftover onto the one with the highest interest rate.
4. Review your credit report – On an annual basis, you should request your free copy of your credit report from Equifax or TransUnion and review each account and item on it. Most Canadians will be surprised to find an account or other item that either isn’t correct or closed but still showing as active. You don’t want to wait until your applying for a mortgage or loan to do this!
5. Set your savings on autopilot – Consider setting up bi-weekly or monthly automatic withdrawals from your bank account into your RRSP or TFSA account. It doesn’t matter how much you contribute at the beginning, only that you get the ball rolling. You’ll quickly forget this money is even coming out and it will be easy to increase your contribution amounts on a regular basis.
6. Make sure you’re protected – An important piece of your financial security is holding adequate insurance. If you rent a home, make sure that you have a tenant insurance policy. If you have a spouse and/or kids, life insurance is simply not an option. If your family relies on your being healthy and able to work, a disability or critical illness policy should be considered.
Spring is the perfect time to get your financial well being freshened up and on track. The only thing preventing you from doing so is you – so start today!