Spring Cleaning? 3 Tips to Clean-Up Your Finances
The sound of birds chirping, the smell of freshly cut grass, the nearly unrecognizable sight of the sun shining—these are all indications of Spring in Central New York that motivate us to start fresh. We take this concept of having a clean slate quite literally in the form of spring cleaning. Our closets, cupboards, outdoor spaces and offices quickly become de-cluttered and re-organized as the new season settles-in…but what about our finances? Here are 3 things you can do to clean-up your finances this Spring:
1. Create a “Debt Snowball” to Pay Down Your Debts
We know, winter just ended and you don’t want to hear about snowballs for a long, long time. However, the concept of the debt snowball enables people to pay-off their debts in a fraction of the time it would take if they just continued paying the minimum payment. People often look to interest rates as a starting point but, in a debt snowball scenario, you disregard interest rates altogether and simply start with your smallest balance while continuing to pay all of the minimum payments each month. With each debt you eliminate, you roll that payment into the next debt…and the next…and the next…until it’s gone! Check out this example to see how truly beneficial it is to get out of debt and get out quick. Carrying debt is like the polar opposite of building wealth. Where saving and investing compounds over time in a positive direction, debt brings you further and further into the negative as it grows larger and harder to manage. Get a fresh start this season by getting the “snowball” rolling and eliminating the debt that’s dragging you down!
2. Update Your Budget & Pay Yourself First
No matter how disciplined we try to be, changes in our lifestyles and budgets are bound to happen. Costs may fluctuate, we may settle into new spending habits, but the key is to review our budgets regularly and make sure we’re paying ourselves first. A common mistake in most budgets is that the saving and investing line is the very last item, which gives people less incentive to make their budget work around their savings goals and more incentive to allocate too generously toward their wants or flexible expenses. This season, define your savings goals first and then see which areas you can afford to cut back. Download our free budget sheet here. Create your budget and stick with it for three months. You’ll be amazed at how prioritizing your savings shifts your entire spending mindset.
3. Review Your Investment Portfolio
It’s wise to review elements of your investment portfolio to make sure they’re on track with your goals. For example, your asset allocation. This is one of the largest determinants of portfolio performance and should directly reflect your current needs, goals, and risk tolerance. Additionally, are you keeping your costs low? The best-case scenario is having a low-cost, diversified, global portfolio. Check-in with your trusted financial advisor this season to make sure that your investment portfolio is on track. If you’re not currently a client of MGI but would like us to take a look at your portfolio, get to know our advising teams and contact us to schedule your free consultation!