Spring, with new life popping up everywhere, is the source of many an impulse to start afresh.
Before you rush out to wine, dine and book tickets and accommodation, remember that most people spend more money between November and February than they do in other months. Spending on Christmas, an annual holiday and higher-than-inflation January increases in education, medical and other fixed costs leave many people starting the new year cash-strapped. It can take months to recover, only to be faced with the same problems the following year.
Now is the time to spring-clean your finances and do something to ensure the cycle is not repeated.
Apply the tradition of spring cleaning, to the mess of files and financial records that have piled up in your life. Here’s how to get going:
- Know what you spend
The biggest spring-clean you can do is to get control of your budget and expenses. Get your bank statements for the last three months and look carefully at where you have spent money, where you have wasted money and where you can change your spending habits.
Time to stop being complacent and reevaluate your bills like cable, cell phone service, and motor insurance. You may find that you have been paying for services that you don’t need or even too much. If you are paying for something you hardly use, give it up; if you can consolidate some payments, make the change.
- Set-up a budget
Work out a seasonal budget from November to the end of January – including festive season spending on gifts, entertainment and holidays – and school uniforms and books. Work out what your new financial commitments will be in the new year, including increases in education, medical costs and insurance premiums. Prioritize what is important. Certain things can be changed, while others are not negotiable.
To help monitor your spending, use a system to tack it.
- Chip away at your debt
Sometimes we feel so overwhelmed by the amount of debt we have, we find it easier to just ignore it in the hopes that it will magically go away. Unfortunately that does not happen. So start off by making a list of all your debt. Start with the smallest debt and pay the minimum monthly repayment, it is paid off. Take the next debt, add to the payment of the last debt you just paid off, the minimum amount of the next debt and pay this amount, till you have paid it off.
E.g. Credit card 1 R250 pm(per month) Credit Card 2 R 250 pm + Credit Card 1 payment = R 500 pm
- Start to save
“I don’t have the money to save”, I hear you say, but you will be surprised. After setting up a budget, you will find areas where you can cut out expenses or reduce them. Take these savings and setup a savings account. Start off with saving in order to cover your monthly expenses should something happen and you don’t get your regular income.
So decide on the amount you are going to start saving this month. Save that for amount for 3 months, and then increase it by 10% after 3 months. E.g. Month 1 to 3 R 500; Month 4 to 6 R 550; Month 7 to 9 R605 etc. Within a year you would have saved R 6,961.50
- Know how long to keep paperwork
Don’t get carried away with your spring cleaning and toss out paperwork you need to keep. If you have digital copies of the paperwork then keep these and discard the copies.
Find out how long you need to keep the paperwork for.
- Start a new habit
Here’s a simple daily routine that prevents mail from piling up. You’ll need:
- A letter opener or serrated butter knife.
- A basket for paper recycling.
- A shredder.
- A box or bag near your shredder for papers to be shredded.
When you’ve picked up your mail from the mailbox, go directly to a table or counter and slice open each envelope, separating the material into three piles:
- Bills and documents you want to use or keep (to pay, act on or store).
- Papers to discard that contain your name, address, account number or any identifying information (to shred).
- Papers with no identifying information (to recycle).
Once you have done the spring clean, you should know exactly where you are financially. Get rid of paperwork you don’t need to keep. Either physically or electronically file the paperwork you need to keep. This will make it easier when you need to file your tax return.
Create a financial calendar from your budget, so that you know when big expenses are coming up and plan for them. Take stock of where you are and know exactly what your financial position is, so that next year this time you will be better off.
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