Spring has arrived, which means many of us are cleaning out closets, decluttering our homes, and ridding our flower beds of weeds and dead brush to make room for beautiful new plants. Spring is a season of transformation, and just like the evolution of dormant grass and plants transforming into lush green lawns and vibrant blooming flowers, you can transform your finances and make your green grow and go further by simply including your budget in your spring-cleaning list.
Budgeting is the key to your financial health. It provides you with a roadmap for your money, helping you allocate funds to the items you need, avoid unnecessary spending, and save or invest effectively to reach your financial goals. Creating your budget, however, is not a one-and-done project. Your finances will change over time as new expenses arise or if your income changes, and you should revisit your budget regularly to ensure that it provides the most accurate snapshot of your current finances, evolving to align with your changing needs.
Since you’re already cleaning in other aspects of your life, there is no better time to plan your annual budget review than during the spring! Here are five easy steps to spring clean your budget like a pro:
- Take inventory of your expenses: What have you been spending money on and why? Sure, you have bills and other “necessary” expenses–but is that necessity actual or perceived? Trace every dollar you spent over the last year, or even just in the last three months. The task can be daunting, but even small expenses like the few dollars spent on morning coffee can add up to a big chunk of your expenditures. Spend some time reviewing what you spent your money on and evaluating whether those expenses were necessary or something you could cut back on or eliminate altogether for the next year in order to free up money for savings or paying off debt.
- Make sure you have properly budgeted for savings and debt repayment. It is easy to overlook savings and debt repayment in creating your budget. You may allocate funds to cover your minimum monthly debt payments in your budget, but what if you accounted for a little bit extra so that you could make an overpayment each month? Even paying just a few extra dollars each month can shave off time from your repayment plan, saving you money by reducing the amount of interest you pay back on that debt. Savings should be no different than debt repayment or any other necessary expense. Contributing to your savings should be non-negotiable. Having an established savings account is essential to avoiding future debt accrued from emergencies or unplanned expenses and lays the groundwork for large purchases in the future like a home or car. At a minimum, allocate twenty percent of your income after taxes for savings and debt repayment. (You can thank me later.)
- Evaluate your income: What can you do to make your money go further? Yes, you can in fact make sacrifices like giving up one of your streaming subscriptions or cutting back on dining out; but spring cleaning your budget does not necessarily have to be all about elimination. If reducing your expenses is not feasible for you now, perhaps increasing your income is. Whether you find a part-time job or pick up a side hustle freelancing on a project-by-project basis, driving for a rideshare company, or grocery shopping for a local delivery service, finding a way to supplement your income can give you the extra wiggle room you need to spend the way you want without having to sacrifice things you enjoy. Prioritize the necessities with your primary source of income, which includes building your savings and paying down debt as quickly as possible, but use that supplemental income to continue dining out, streaming your favorite movies, and funding other “unnecessary” expenses that would otherwise break your budget every month.
- Review your financial obligations: Are you sure you’re getting the best deal? When it comes to routine expenses like cell phone service, internet access, and insurance, you have probably been with the same provider for a while, therefore, you likely do not know if you are getting the best deal because you haven’t considered the alternatives in quite a while. Spend some time exploring the rates, discounts, and savings available through your provider while also looking into competitors. It is easy to fall into a routine with the service providers we are comfortable with solely because they are familiar. However, if your service provider cannot offer you the best value, you are throwing away money. Be intentional with your money, taking care to spend only what you need, and avoid wasting money when you can get the same service elsewhere for a better price.
Stick to it: Find a budgeting method that works for you. If you have had trouble sticking to a budget in the past, now is a great time to explore other budgeting methods that might be more successful. Whether you need a strict budget like zero-based budgeting where you track every single dollar, or something with a little more flexibility like the 50/20/30 method, it is important to find a budgeting method that you will actually use–one that will fit into your lifestyle. Ultimately, creating a budget is only half of the equation. There must be some accountability in sticking with your budget for it to have a positive impact on your financial health. To do so, choose the method that works best for you and create ways to motivate yourself to stick with it–no matter how hard it may seem!