By Paula Pant
It's that time of year again! Temperatures are getting warmer (or trying to), days are longer, and you're starting to feel that urge to open up the windows and clean out the dust bunnies for a fresh new start.
But while you're vacuuming and sweeping and polishing, don't forget another big area of your life that could also do with an annual overhaul: your finances. "Spring cleaning" your finances means first taking a big-picture look at your financial health, and then clearing out the cobwebs that muck up your monthly budget.
Here's your game plan:
Assess Your Current Situation
Don't just look at the next bill you have due -- look at the big picture.
What's your net worth (all your assets, minus your liabilities)? How quickly are you paying off debt? How fast are your savings growing? What are your big goals (such as buying a house), and how quickly are you progressing?
It's hard to stay on the right track if you're not sure where you're going, so get clear on your situation first and foremost.
Clear Out the Clutter
Clean any expenses that are unnecessarily dragging you down, such as:
• Subscriptions to magazines or other services you rarely use.
• Pricey cable subscriptions. Do you really need that 300-channel package when you watch maybe 10 channels regularly?
• Monthly gym memberships when you know you're never really going to go to the gym, as much as you say you will.
• Late fees, convenience fees and other charges you could eliminate if you just planned a little more in advance. Automate your bills to avoid late payments. Plan out your meals in advance so you don't find yourself grabbing fast food on the go. An ounce of prevention, as they say...
Review Your Ongoing Payments
When you have regular recurring expenses, it's easy to "set it and forget it" -- you analyze the costs when you first sign up, then keep paying the same amount every month out of sheer habit. Take a look at your ongoing payments to make sure you're still getting a solid deal.
• Your cell phone plan. Do you really use all those minutes? Can you cut back on your data plan?
• Car insurance. Can you take a safe driving course to get a discount?
• Homeowner's/renter's insurance. Do you have all the coverage you really need?
• Multiple-policy discounts. Can you bundle any of your services to save even more?
Review Your Portfolio
Check in to make sure you're allocating assets the way you should be. Your mix of stocks and bonds should be aligned with your age, timeline, goals and risk tolerance. (And within those broad umbrellas, your mix of large-cap vs. small-cap stocks, U.S. vs. international stocks, Treasury bonds vs. junk bonds, etc., should be properly allocated, as well.)
Are you investing in a decent mix that's aligned with your age? Have your priorities changed so that some adjustments need to be made? Rebalance if needed.
Maximize Your Savings
Automate your savings so that a certain amount is deducted from your checking account or paycheck every period. Send that money into a savings account. Make sure your savings are in an account that pays a decent interest rate.
"Out of sight, out of mind," is the easiest way to keep yourself from dipping into the money to meant to put aside.
Check Your Credit Score!
This is an important step that so many people neglect. Credit makes a huge impact on everything from your insurance rates to your ability to rent an apartment or refinance a mortgage.
If you're not monitoring your credit, you're putting yourself at unnecessary risk. And you might be paying higher interest rates, higher insurance premiums, or other fees as a result of "bad credit" that's the result of a simple, solvable error.
You're entitled to a free credit check from each of the major credit reporting agencies (Experian, Equifax and Transunion) once a year. Take advantage of that benefit. The best way to monitor your credit is to check once every four months (e.g. January, May and September) with one of the three credit agencies, in rotation. If you spot an errors, report it to the agency immediately.