Outstanding Ways To Spring Clean Your Finances, for Your Future
Most of us carry out routine clean-up sessions for our offices and our homes, but neglect to tidy up an important element of our personal lives. When left unattended, the control over our own finances may slip out of hand, leaving us with unchecked, unnecessary expenses or unexplained deficits (thanks, inflation).
Here are some handy ways to do a quick financial health-check, and make sure that your bank account is in good shape for the coming months!
1. Check Your Outstanding Debt
At some point in our lives, most of us are likely to be in debt for one reason or another. Be it a home, credit card, study, or car purchase loan, these figures tend to accumulate with time (thanks, interest), and can easily leave one in debt.
When taking stock of your existing loans, it is important to start with a big-picture perspective and understand exactly what your salary is financing each month. Get a handle on how much you owe by looking at your bank statements (for automatic deductions) or by making a physical list of the creditors you are currently tied to.
If you are carrying debt across multiple accounts, and are having trouble honouring your payments each month, it could spell major trouble for your medium- to long-term financial health. Once you have figured out how much you owe on each account, call your creditors to explore loan refinancing options. Loan refinancing or consolidation would make prudent sense to both parties, and would have less adverse effects on your credit score.
On that note, find out if it is possible for you to get a free credit score check in your country. Having an up-to-date understanding of your credit score will help influence your future financial decisions, empowering you to make more responsible choices.
2. Set Up Automatic Payments
As covered in the previous point, automatic payments are a great way to enforce financial responsibility in the short-term. If you have refinanced your existing loans, or have organised them into a manageable format, setting up automatic payments after each pay-day ensures that you do not fall behind on your commitments.
Automatic deductions also remove the burden of having to keep track of several due-dates for different banks or financial organisations, saving you a great deal of stress at the same time.
As opposed to not taking on any loans, timely repayments to banks actually have a positive effect on your credit score. They slowly but surely contribute to building a higher rating, helping to identify you as a trustworthy loan recipient.
3. Reevaluate Your Insurance Needs
Once the immediate commitments have been sorted out and placed in order, it is time to look at your medium- to long-term commitments. Locate your auto, home, life, accident, and health insurance policies, along with those belonging to any other types of insurance you may be carrying.
Review your premiums, deductibles, and beneficiaries to ensure it all still meets your needs. Perhaps a higher deductible with a lower premium may suit you better at this stage in your career, or maybe you could consider taking on a more comprehensive plan.
Make sure your insurance provider or agent is aware of any recent changes you may have made to your home, such as adding a security system or a kitchen renovation. These improvements may lead to a lower monthly payment, and could save you money in the long run!
4. Rebalance Your Portfolio
During, or after, tax season every year, it is advisable to rebalance your investment portfolio. This should go hand in hand with tax filing, as you are likely to need your investment paperwork handy for submission as well!
Your asset allocation, which was once beautifully and diversely planned out, may no longer be in a harmonious, profitable balance. Realign these with your current goals, based on your career, family, and aspirational commitments.
Make sure your investments are doing the work you expect of them by shifting your money into more or less aggressive asset classes to reflect your current risk appetite.
Speak to a trusted financial adviser if this task seems daunting; making your money continue to work for you is certainly a worthwhile exercise to undertake!
Congratulations, you are now in better financial health! On a separate note, find out what impact retirement ages and median life expectancy figures may have on you and your bank account. Understanding the impact of these factors could help influence responsible decision-making and ensure sufficient preparation for the sunset years.