Spring is often associated with fresh starts and tedious home cleaning. However, for others, spring is also an opportunity to work on financial matters. Spring also marks the deadline for filing tax returns and for settling some difficult financial decisions. Finances matter, especially during these hard times. Here’s what to avoid when attempting to spring clean your finances.
- Don’t go cold turkey.
The warm season could be a great motivation for you to make changes. However, going on a drastic budget adjustment could have unwanted effects on your finances. Some cut out things as much as they can for the sake of saving more. Yet, this can be unsustainable.
For you to enjoy the fruit of your labor, there needs to be a balance. You can be smart with your money even when you need to save more. You do not need to let go of your streaming subscription, and other “wants.” Be intentional, but do not go overboard.
A good measure for balance would be to do the 50/30/20 method. This system allows you to put 50 percent of your monthly income into basic needs, 30 percent to wants, and 20 percent into savings and loan payments. If you need to get a loan, make sure it could be part of the 20 percent you need to set aside.
- Don’t get rid of your credit cards.
Owning a credit card can be tricky. Some people who own cards feel like they can spend a lot, as long as they do not go over the limit. However, credit cards are not easy money. These are debts. Eventually, credit card spendings should be paid. And not paying for credit cards can put a dent in your credit score.
Yet, credit cards are not always bad. They can help when you do not have extra cash for an emergency. Having a good credit score is reliant on your credit card spendings, too. A good practice would be to be mindful of all your credit card spendings for the month.
If you are confused with your credit card spendings, you can explore other options to make credit monitoring easier. Some credit cards allow balance transfers at a lower rate. There are also credit cards that do not have annual fees. Ask your issuing company for questions and other options.
- Don’t spend all your tax refund
Spring marks tax season. Many people get their tax refunds in April, and it can be tempting to spend it all in one go. Yet, this is a common financial mistake. Many people spend on the latest gadgets or trends that they cannot afford on a normal payday.
You can use your tax refund to refuel your emergency fund or to pay existing debts. You can also use this for home or car repairs. If you are not sure about how much refund you will get, you can check the tax withholding estimator from the IRS to plan ahead.
- Don’t forget your retirement contributions and investments
Many young working professionals nowadays do not have goals for their retirement. They tend to forget allotting money into their retirement contributions. This is important, especially for those who plan on building a business after their stint in the office.
When saving for retirement, a good start would be to allot 10 percent of your income. If you are starting after your twenties, you can increase it to 15 percent. If you have trouble understanding your current investments, seek help from your financial advisor.
- Don’t put your money in random accounts.
Some people keep several accounts for different purposes. Yet, it is important to make sure you know where your money goes so you can reach your goals better.
You could be putting your emergency funds on your retirement fund. You can opt for high-yield saving accounts for long-term savings for your emergency fund, so you can withdraw these easier in case of emergencies. These also have high-interest rates, so you’ll earn as you save more.
You could be too fond of looking at your net worth, but you need to be organized with your money. Paying attention to your finances can help you grow and maintain a good amount of savings over time. Determining the important things can help you progress in your financial journey.
Spring cleaning your finances is part of your spring self-care. Keep a list of expenses and earnings can be a great start, but you may want to explore other tracking options. Various apps can help you manage your finances better. It does not take much of your time, and you’ll be happy to see your progress. This will help you feel more at ease as you know where your money goes.
Meta title: Do Not Do These When Fixing Your Finances
meta desc: Spring is the perfect season to rethink your finances. Yet, some people go overboard when it comes to money matters. Here’s what you should not do when spring cleaning your finances.