What is it about beautiful 75-degree, sunny days in March that make people clean out their garages, closets and foundations with almost a manic fervor? Well, since I live in central Illinois, I wouldn’t know.
Whatever the reason, a 2020 survey by the American Cleaning Institute found that 78% of Americans do some type of spring cleaning. If you are one of them, great. But when you’re done cleaning your garage, take some time to spring clean your finances as well.
I’d advise you to target one area of your finances each week in April.
First, examine your spending and see if there is any area you could cut back in to save money. A budgeting app and your credit card statement are good tools to use to see your spending history.
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One area in particular to look at are subscriptions.
Just a few years ago there weren’t that many subscriptions besides Netflix, book-of-the-month clubs and BMG’s CD music club.
Today, we’ve still got Netflix and book clubs, but you can also subscribe to quite a few different streaming services, as well as a plethora of box-of-the-month clubs for clothing, beauty products, men’s razors, science projects for kids, meals, pickles, pet food and more.
There’s even something called the Cat Lady Box. For just $40 per month, you’ll receive a box filled with cat toys, cat-shaped cooling racks, hoodie blankets with cat ears, and other necessities.
With so many tempting subscriptions out there, it can be easy to sign up for a few too many. Over time, you might even forget which ones you still have and use.
Make a list of all your subscription services and cancel any that you don’t use or want anymore.
Next, ask yourself, “If I lost my job and couldn’t get another one for three months, how would I pay my bills?”
If your first inclination is to whip out your credit card or shrug your shoulders, then your next financial goal in April should be to establish your emergency fund.
How much you need in your emergency fund depends on your monthly expenses and how secure your job is.
Everyone should have at least enough money to pay living expenses for three months. If there is any risk that you might lose your job or get temporarily laid off in the near future, you should save at least five or six months’ worth of living expenses.
Emergency funds allow you to take care of unexpected expenses without going into debt. If your refrigerator dies, you need a root canal, or you lose your job, your emergency fund is there to save you.
Without an emergency fund? It’s likely that your debt and stress level both skyrocket.
Finally, start investing for retirement.
According to a 2021 study by the Federal Reserve, 25% of Americans have no retirement savings.
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If you are one of those individuals, commit yourself to start saving for retirement in April. If you don’t know where to begin, that’s understandable. Just make a promise to yourself to spend a week or two in April learning about it.
You can do this by making an appointment to meet with a financial coach or adviser. Or read the retirement section in Ramit Sethi’s book, “I Will Teach You To Be Rich.” Another free option is to listen to financial podcasts and watch YouTube videos produced by reputable sources.
Anyone can learn how to accumulate enough money to retire, but it will take some time and effort.
Once you understand some basic strategies for investing for retirement, then the next thing to do is to start doing it. It’s okay if you can’t invest tons of money every month at first.
For example, maybe you can’t afford to fully fund an IRA yet. That’s okay. You have to start somewhere. When I first started my IRA years ago, I could only invest $125 per month at first.
While $125 per month is far less than a fully-funded IRA ($500 per month if you are under 50), it’s a heck of a lot better than zero dollars a month.
The point is, just start investing for retirement, even if it’s only $50 or $100 per month. It will add up over time, and hopefully you will be able to increase your contribution level when you get a raise every year.
Spring cleaning is a fine tradition, but let’s face it: sometimes the biggest mess isn’t the cobwebs and dirt accumulating in your garage. It’s your finances.
So finish reorganizing your basement, and then dedicate April to spring cleaning your money. You may reap the financial benefits the rest of your life.
Dave Kinzer is a music teacher and a financial coach in Springfield. Contact him at www.davekinzer.com. His column from him will appear here every other Wednesday.