May 13, 2016
Yep, spring has finally sprung. That means it’s time to clear out the clutter and bring on the elbow grease to clean your house—your financial house, that is. If you haven’t done it in awhile, be prepared for some heavy scrubbing, but keep in mind it’ll be much more like feather dusting when next spring rolls around.
Here are a few tips to get the financial spring cleaning started.
1. Out With The Old
If you have years upon years of bills, statements and records lying around, it can be downright paralyzing. Getting out the shredder is a good way to get moving, plus it’ll be therapeutic!
So what stays and what goes? The IRS recommends keeping tax returns for three years for most people, though longer if you owe back taxes, for example. Consumer Reports breaks down the ‘keep or go’ piles into a few categories: keep less than a year (i.e. ATM receipts), keep a year or more (loan documents, for example, should be kept until pay off), and keep forever (i.e. birth certificates). We recommend making at least one ‘forever file’ per person in your household and one ‘less than a year’ file so you can stay on top of your cleaning all year long.
2. You Are A Number
Let us be clear: You are NOT a number to Nevada Housing Division. We love our peeps! However, you are very much a number to the credit reporting agencies and the folks who lend money or extend credit. So, do you know your credit score number? If you don’t, find out. If your score is lower than you need for major purchases, it will take time to fix or build your credit score.
It’s a common misconception that checking your own credit will negatively impact your score. It won’t. Forbes Magazine knows a thing or two about that. Pulling your credit report from a reputable company like Credit Karma can also help you see where you’re spending money and what interest rates you’re signed up for—for free.
3. Tidy Up The Budget
Except in cases of legendary penny pinchers (who don’t need to read this!), there’s always room to tidy up the budget. Whether it’s switching to bargain brand cleaning supplies, changing your car insurance provider or cutting back on $7 cups of joe, there are ways to save without sacrificing the things that are important to you. So how do you set up a budget to know what you’re truly spending? We could spend hours, days, weeks and months on this topic alone, but here’s the Cliff Notes version. (This is the part where the calculator comes in.)
Start by identifying your monthly household income. Then add up your regular bills (rent or mortgage, car payments, school loans, car payment, food, utilities, etc.) If your bills fluctuate, it’s best to add up bills for three or more months, and come up with an average. Hopefully, you’re in the black, but if it’s more of a charcoal gray, you may want to separate expenses into necessities, wants, and did-I-really-buy-that? That can help you eliminate frivolous spending. For more information, keep it real simple – as in, Real Simple. (They have a great tip involving highlighters.)
4. Say Yes To Autopilot
There are a couple of ways to make your financial spring cleaning feel like the robot vacuum is taking care of business without you having to lift a finger.
First, set up automatic payments either through your bank’s online banking feature, or directly with the companies you owe money to. This will help you build credit over time because you’ll be less likely to pay bills late. For bills that fluctuate from month to month, try setting up an amount to pay out by the bill’s due date that meets the minimum payment due. Doing so will help keep you from paying all those unwanted late fees, too. Hello, savings!
Speaking of savings, we also recommend that you set up a monthly automatic transfer from your checking account to your rainy day fund (aka savings or investment account). Whether you choose a set amount or a percentage of your paycheck, you’ll be automatically setting aside money that most people are not disciplined enough to do manually on a regular basis. Out of sight, out of mind, in your best interest.
Approach Financial Housekeeping As You Would Eating An Elephant (Not Literally!)
Have you ever heard this riddle?: How do you eat an elephant? One bite at a time. Getting your financial house in order can be a pretty tall order, but getting started is probably the hardest part. We hope this information helps you tackle your financial spring cleaning. And when you’re ready to buy a home, be sure to check out our lender finder, as our lenders help qualifying people clean up with great homebuying programs.