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A 3-Step Plan for Financial Spring Cleaning

If you’re reading this in the (Coronavirus) spring of 2020, it’s likely that cabin fever has inspired you to do some spring cleaning around the house. Now that your sock drawers are organized and closets tidied up, why not tackle our 3-step financial spring cleaning plan? 

Most Americans don’t check in regularly with their finances. Why is this? One reason is clear...there’s always something more pressing—or more appealing—to do than dive into your Quicken software or the Excel budget you created in the New Year. 

But you have an opportunity to do yourself, your family, and your wallet a big favor by checking in on your financial health. Today, our team will walk you through a simple system to help get your finances back on track.

Why it’s smart to monitor your money

At Pro Wealth, we’re a little biased since we love analyzing numbers, but we believe that with the right mindset you’ll soon realize the benefits of monitoring your money and see it as a worthwhile investment of your time. 

What’s more, you just might learn to enjoy the feeling of being on top of your financial game.

Like any goal worth setting and achieving, a financial check-in can be gratifying when you see the progress you’re making. Even when temporary setbacks occur, staying the course and focusing on the long term can keep you engaged and motivated.

Ready to dive in?

Start by devoting one week to each of the three financial spring cleaning tactics outlined below. 

If you have a family, do this together with your spouse (and kids if they are old enough). Some families call these “kitchen table money summits” where they discuss the family budget, spending, priorities, etc. 

While kids may not be included in all aspects of a family’s money conversation, many families are using the 2020 economic crisis as a teachable moment for children. If handled democratically, kitchen table money summits can strengthen bonds and empower all family members at a time when everything can feel out of our control.

1. Dust off your budget

We prefer the term “spending plan” since the word “budget” can signify sacrifice and scarcity for some. The reality is that we have nearly complete control over how much we spend on our housing, food, clothing, cars, and extras. Taking ownership of our spending preferences and habits is important.

Remember that spending plan you created at the beginning of this year (or maybe last year)? Did you follow it fairly closely until the Coronavirus pandemic hit?  Did the virus rearrange some of your financial priorities as well as your social contacts?.

What did you do well in terms of your spending plan? What didn’t work so well? What new good habits did you practice so far this year? What may have been missing as a motivator to stick with your spending plan?

The most important thing is to find a system to track your expenses so you know where your money is going. You can find budget templates online, create your own in Excel, or use a free or low-fee app or software like Mint, YNAB, Wally, or Quicken. 

After you identify what percentage of your household income is going to your top five or so expenses, you begin to see patterns that can help reprioritize spending allocation.

2. Clean up spending habits

Financial spring cleaning inspires an honest look at how well we’re preparing for economic crises as well as our long term financial security. It’s fascinating to us as financial planners how the Coronavirus has clearly changed the way Americans think about money. 

It feels more important than ever to make our financial lives a top priority. Nobody wants to experience the anxiety felt today by so many unemployed or furloughed Americans who had no emergency funds and who are currently struggling to pay rent, mortgage, and bills. 

Bottom line? Smart spending habits are a huge predictor of long term financial success. 

Our experience has shown us that effective spending plans allocate money only to what matters most, with specific percentages of household income going to savings and investments. 

By spending money on things that are meaningful ‘needs’ vs. frivolous ‘wants’ we develop smarter habits. Our new habits should reflect our financial and personal goals and values, and we set ourselves up for our best possible future.

With regard to reining in spending, certain things really do add up. It’s likely that during your shelter-in-place period, you’ve already started reining in spending. That’s a good thing. It’s an ideal time to experiment with the wants vs. needs in our lives, and ideally, our new habits will stick with us.

Here are some intentional ‘financial spring cleaning’ habits you can focus on in the coming weeks. Over a year, you could save thousands of dollars.

  • Choose to eat out only 1-2 times per week 

  • Review your subscription services and seek out lower-priced plans

  • Rein in online shopping---what’s truly a need vs. a want?

  • Be more intentional about all purchases and money decisions

  • Don’t replace cars or household items that aren’t broken

3. Revisit your financial goals

No matter what the global situation and your own financial picture, it’s a perfect time to revisit your financial goals. Only by doing regular financial check-ins can we see how far we’ve come and identify areas for improvement or adjustments.

With today’s uncertainty, we are forced to look at our money more than ever before. The upside to committing to financial spring cleaning is that we can actually reduce anxiety or depressive thoughts when we focus on a vision for the future..one that’s way beyond our current circumstances. Only with vision can we move forward.

We shared in another article the importance of navigating the emotions you have about your financial plan. Those feelings, whether positive or negative, can help lead you to practical solutions. 

This spring, families with kids have additional money decisions to make, regarding daycare, summer camps, vacations, etc. Make a list: based on your situation today, what may require adjusting, canceling, or rethinking? If we cancel our summer vacation, where could that money be reallocated? Can we find a local source for daycare shared with neighbors or friends, while we work from home?

We acknowledge the challenges you may be facing today and know that having clarity on where you are today and where you want to go can help you fine-tune your priorities and your family’s financial plan.

A planning mindset wins the game

At Pro Wealth Management, we’re here for our clients throughout the year for all the reasons mentioned above. A planning mindset keeps us focused and moving forward. Our firm exists to create structure and goals for your financial life and to adjust them with you as your life circumstances evolve. 

We encourage you to check in with us about the tax consequences of career and investment decisions you may be making or considering this year. We can walk you through the pros and cons of tough money decisions. 

Finally, we are helping many of our clients with a short-term, five-year plan; ask us about how that might work for you too. Call us today and set up a time for us to talk. We’re here for you.