It’s that time of the year – spring cleaning! Nothing feels quite as good as thrusting open the windows and ridding our homes of all the built-up dust and stale air from a long winter spent hibernating indoors. But why not go one step further and give your finances the spring clean they deserve? Dive into every nook and cranny by taking a look at how you spend, save, and grow your money today.
Cleaning up your “financial space” can not only move you closer to your goals, but it can also provide mental clarity. When you prioritize your finances, you can take control of your life, and ensure you’re on track to where you want to be in the future.
Here are five ways to clean up your finances this spring:
Let’s face it – spending money is a necessity. Your spending habits can impact whether or not your finances stay on track. That’s why it can be beneficial to establish healthy spending habits to minimize the risk of living beyond your means and impulse-buying. See spring as an opportunity to refresh these habits and save money.
Start by auditing your current expenses. Do they exceed your income? Are they a roadblock to your savings goals? Consider where you can cut your expenses. A great place to start? Audit your monthly subscriptions and automated payments. You may be surprised to discover a collection of services that you’ve been regularly paying for but may not have used in months. These may include:
- Streaming services
- Cable channels
- Gym membership
- Amazon Prime delivery
- Food delivery boxes
If you aren’t getting enough bang for your buck with these subscriptions and services, then it may be time to reevaluate their purpose in your life (at least for the time being).
Pay attention to patterns in your spending habits. If you are mindful of your spending, you’ll likely discover patterns that show how and when you spend your money. Perhaps you may notice that your spending is highest on weekdays as you tend to splurge on coffee and lunches when you’re at the office. Or perhaps you tend to make impulse purchases when you’re scrolling through your phone each night before bed.
In both cases, a little bit of planning and small tweaks to your routine can help to save you money. You may be pleased to find that these small changes (like packing a lunch or leaving your phone in another room before going to bed) won’t only help curb poor spending habits but may also improve other aspects of your life.
Spring can be the perfect time to dust off your budget. Budgeting is one of the best tools to meet your short-term and long-term financial goals, but we understand just how hard it can be to stick to a budget when temptation lurks around every corner!
The key is to be realistic when creating and planning your budget. Your budget should aim to cover the necessities (food, shelter, clothing, transportation) first, and then move into other planned and unplanned expenses. Scheduled check-ins can help you adjust your budget depending on your life circumstances or changing needs. If you have existing debt, set up your debt repayment plan and align it with your budget.
A popular approach to helping you stick to your budget is called the envelope system. This entails setting aside exact amounts of cash in envelopes for different budgeted expenses each month. For instance, setting aside $50 cash for entertainment and $300 a month for groceries. If you use cash, you’re more likely to avoid overspending or making impulse purchases.
One of the best ways to ensure your finances remain on track all year round is by automating your savings, investments, and bill payments. This “set it and forget it” approach to financial management helps you meet your monthly budget and savings goals and avoid late payments on bills without having to actively manage your accounts. Here’s how to automate your finances:
Savings: Automate your savings by setting up an automatic transfer from your chequing to your savings account upon receiving your regular pay cheque. Make sure there are enough accessible funds left within your chequing account to meet daily expenses.
Investments: Automate your investments by setting up an automatic transfer from your chequing account into your investment account. You should be able to complete this on your banking app or via an investment app like Wealthsimple. Set it, forget it, and watch your investments grow!
Credit Card & Bill Payments: If you make a late credit card payment, you will incur hefty interest charges upon any mounting debt. Set up an automatic payment from your chequing or saving account to cover your credit card debt each month. This automatic bill payment can be set up for any monthly expense, such as utility bills or your phone bill. The cherry on top: ensuring you meet all payment deadlines can help you build a good credit score.
Take time to review your investments and evaluate how much your money is growing.
How are your investments performing? If your investments aren’t performing as well as you had anticipated, then it may be time to make some changes. This could mean it’s time to schedule a meeting with your financial advisor.
If you have extra funds, it could be the right time to maximize your RRSP (Registered Retirement Savings Plan). An RRSP is a tax-sheltered account that allows you to save for your retirement. If you can afford to, it’s a good idea to take advantage of your contribution room every year. You can even take out an RRSP loan if you’re short on cash but want to maximize your contribution before the deadline.
If you recently become a parent, then it’s a good time to consider saving for your child’s post-secondary education costs. An RESP (Registered Education Savings Plan) is a savings account for parents who want to save for their child’s post-secondary education, and allows your contributions to grow tax-free. The government even matches 20% of your RESP contributions up to $2,500 per child per year!
Protecting the financial future of your loved ones is critical; spring can give you an opportunity to review your insurance policy (life and home insurance) to ensure your current coverage fits your needs.
When you last purchased insurance, your life circumstances may have been different. Ask yourself, “how has my life changed since then”?
If you recently had children, then you have a new priority. You may want to safeguard their financial futures by increasing your life insurance coverage. If you’ve made home renovations like an updated kitchen or finished your basement, then increasing your home insurance coverage may be a good idea to protect this added value.
Getting in the practice of periodically reviewing your insurance policy is not only a great way to assess if your coverage amount is sufficient, but it can also get you thinking about whether your current insurance providers are meeting your needs. If you’re not receiving the level of customer support that you require, consider shopping around for new providers.
Making it a priority to clean up your finances this spring can be a savvy way to get ahead and move closer to your financial goals. Leverage these tips to toss out your debt, dust off your budget, and clear your financial space.