Spring is here! That means it’s time to go out and see the flowers, clean out all the clutter and overhaul your financial health! Wait… what?
How To Do An Overhaul
Spring cleaning your home is important, and so is de-cluttering your mind. It’s time to freshen everything up and let some air in. Why should your finances be any different? You’ll be surprised at how much money you could save after giving it an overhaul.
Here’s a 12-Step guide to getting a grip on the situation. Do one step every day, understand what you’re doing and this way, it won’t overwhelm you.
1. Income vs. Expenses
The hardest part to starting anything is just that – starting. This is true to exercise, writing and taking control of your finances. The first step is analyzing your income and expenditure – because you need to know where you stand and you need the budget to manage them.
This also involves making a list of your assets and adding up all your debt. You need to compile a list of any new purchases, new debt and as you go, remove the debt you’ve cleared.
2. Implement A System
If you’re old school – pen and paper. Invest in a ledger. But if you’re proficient in Excel or you know somebody who is – setting up a worksheet works best. With this and a number of well placed formulas, you can track exactly how much money is coming in every month and how much you’re spending. By doing so, you can create a monthly budget.
3. Treat Yo’ Self
You need to know what you’re saving for. What are your goals and motivations? How much will these things cost and how long will it take to get there? Work out what you can cut or how you can free up some money to achieve this goal. This is an important step, because it puts everything into perspective. We’re not working for nothing over here.
4. Make It Automatic
The key to saving is making it an automatic thing. Wanna splurge? Don’t do it. Save money. Don’t waste. Reuse and make smart purchases, it’s time to throw out any expensive habits. If you feel the urge to splash the cash, take a look at your goals.
You’re not gonna reach them eating McDonalds every day. In the end, it will be worth it.
5. Can You Earn More?
If you have the energy and the time, why not look at supplementing your income? If something comes along that easy to do and worth your while – take it. Game of Thrones is over now, you’ve got a full year to do something more constructive with your free time.
6. Review Your Investments
A periodic review of your investments will reveal whether your allocations are out of balance and if you’re taking the right amount of risk. A portfolio geared for growth and income usually holds around 60% stocks and 40% bonds. For people with a higher tolerance for risk and a time horizon of ten years or more—these could be at 80% stocks and 20% bonds.
There are a number of free services or tools online which can help you accurately assess your situation.
7. Know Your Credit Score
Unless you’ve been relentlessly badgered by debt collectors or the sheriff lately, many of us don’t know what our credit score is. This is actually pretty important. A high credit score could mean better deals for credit cards, loans, mortgages or store contracts… So, knowing your score, and ways to improve it, can increase your choice and save you a bunch of money.
Also, if your credit score is high – that doesn’t mean you should blow all of it. AVOID new debt at all costs.
8. Review Your Banking
Does the end of the month light your phone up like a guy fawkes celebration? Too many debit orders going off or are you paying too much on bank charges?
How about all those subscriptions and memberships you don’t need or use anymore? Cancel unnecessary expenses. You can always pick up where you left off some other time. Likewise, how and where you choose to bank and spend makes a difference.
9. Organise Your Documents
If you’re in the habit of filing all your important documents, good job. This is also key to maintaining your financial affairs. However, you shouldn’t hang on to anything longer than you need to.
Save the essentials and toss the rest. Keep receipts for the big things, like furniture, appliances, vehicles and technological items until they are disposed of. This is for insurance claim purposes –providing proof of ownership and their value.
Tax return supporting documents, student loan documents, credit card statements. Real estate, banking, bitcoin, insurance, retirement plans, employee benefits, etc – these all need to be sorted out. Keep records of savings, investments and property until they are sold so that you can have an accurate record of your assets.
If you have a scanner handy – even better. Keep all your records safe and sound and tidy in desktop folders.
10. Get A Will
It does not matter who you are or what you do or how wealthy you are. You need a valid, updated will. Without one, your estate and all your wishes are a tangled mess.
If you already have one, use this time to ensure it’s up to date, especially if significant events have taken place since you last assessed it. These events could include the birth of children, a change in your marital status, the death of a beneficiary or executor, or if you have acquired any new assets.
If your financial circumstances have changed, like, say, that Nigerian prince / estranged relative who kept emailing you finally came through for you, then you may need to make provision for this in your will as part of your estate planning.
11. Assess Your Insurance Policies
You need to check that you are correctly insured and neither over- nor under-insured. The change in replacement value of your assets should be reflected in your insurance policies. Remember that some assets are likely to appreciate, such as art or jewellery, whereas others will depreciate, like your Ford Kuga, the very minute you buy it.
Your long-term insurance should be current. Do you have any children now? Have you gotten married? How about installing a new security system in your home? Look at your changed circumstances and adapt your insurance accordingly. Perhaps you could reduce some premiums, or if you haven’t claimed in years, maybe ask for a discount.
12. Finally, Face SARS
We know. We know. Nobody wants to do it, but it’s got to be done at some point. So, you may as well make it the final act in your financial spring-cleaning opus.
Collecting, compiling, sorting and submitting all the necessary documents to SARS can be a pain, but if you qualify for tax refunds – ka-ching!
If you have any tax-deductible expenses, such as medical aid or pension fund contributions, you will likely qualify. There are a number of online sites, such as TaxTim.com, which can help you get this done.
You can’t avoid it any more… The time to adult is now.