Many people are inspired by the idea of starting cleaning projects. We can open the windows of our homes and air things out. What’s more, outdoor spaces get cleaned and landscaping trimmed so we can enjoy the sunshine.

Just as keeping our house tidy is important, it’s also crucial that we “clean up” our financial affairs. Some may already follow a structured budget, tracking every expense and religiously balancing their checkbooks. Others wince when they check their ATM balances after the weekend. No matter how frugal and organized you may be, everyone can benefit from financial cleaning.

There are several simple and effective financial cleaning methods, from creating a budget and reigning in expenses to organizing paperwork and executing important legal documents. Here’s how to make an assessment of your financial situation and get busy making it shine.

Make this year the one in which you establish and stick to a budget

The most impactful financial planning tool is a budget. Far too many people spend whatever they have, without any regard to what they may need in the near or distant future. A budget optimally provides clear guidelines for spending, but even at a minimum, it provides knowledge and information. How much money have you spent on coffee this month? Do you even know? 

A budget helps identify income and expenses and is crucial in planning. If you have a shortfall each month, you will increasingly become in debt. Identifying potential shortfalls helps you form career goals and plan future purchases. A good first step to establishing a budget is to download a Google Sheets template. Take a look into some personal finance apps to take your budgeting to the next level. Apps such as MoneyLion, Mint and PocketGuard allow you to track and analyze your spending. Some online banking providers, such as Simple and Ally, provide trackable spending abilities as well. 

Get on top of your credit

Financial cleaning is an ideal opportunity to review your credit. Consumers are entitled to one free credit report from each of the three credit bureaus each year. Many ignore this benefit, and either assume they have great or horrible credit. You may be surprised, so pull a copy of your report and check it over for accuracy. For a fee, you can also learn your credit score. Some credit card companies provide credit scores to their customers each month – check with yours to see if you have this option.

Clear up your tax situation

It’s important to make sure that you are withholding properly and maximizing deductions and credits. Take a moment to run withholding scenarios based on the previous year’s income amounts using the IRS’s online W4 calculator

Ultimately, financial health depends on knowledge. Through budgeting, tracking spending, and knowing your credit and tax situation, anyone can better control their finances.

Photo Credit: Pixabay

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