The spring season is a time of rebirth and renewal. This month, let’s keep that feeling in mind as we look at ways to renew your budget! Check out these three actionable steps to make a breakthrough in your finances.
3 Spring Cleaning Tips for Your Budget This Month
1) Tackle your debt.
Getting out of debt is one of the most freeing and empowering financial goals you can set for yourself. Assuming you already have at least 3 to 6 months of emergency cash saved up (make that your priority if not), now’s the perfect time of year to start cutting down some of that red!
If you have multiple sources of debt (e.g., credit cards, car loan, student loans), consider focusing on the one that has the highest interest rate; paying this one down faster can save you thousands of dollars. Alternatively, you could put the extra money toward whichever loan is smallest, regardless of interest rate.
Once you’ve identified which debt you’re going to tackle this spring, immediately start putting an extra $50 or $100 toward the loan’s principle (or however much you can comfortably manage) while continuing to make the minimum payments on the other ones. When the high-interest loan (or smallest loan) is paid in full, simply take the funds you were putting toward it and apply it to your other debts to double down on the rate of repayment. Win-win!
2) Automate payments.
These days, most institutions offer automatic payment plans for monthly bills. Here’s why we think this is a great idea:
For one thing, you won’t get pinged for missed payments, which can incur fees and costly demerits to your credit score. Additionally, many institutions offer small discounts for signing up with their auto-pay plans. This can save you hundreds of dollars over time.
Lastly, knowing that you’ll always need at least enough in your checking account for automated bill payments can help you stay more accountable for your budget and day-to-day spending.
Bonus breakthrough idea: set up an automatic savings plan, too! Automation mitigates emotional decision-making and the lure of instant gratification which often stop us from saving and investing.
3) Scale back on your “extras.”
What do you buy every week that you want but don’t need? Think to-go coffees, meals out, or shakes and smoothies at the gym.
We’re not saying you have to nix these non-essential purchases altogether (but by all means, go ahead if you want!). Instead, choose to cut back by anywhere from 25-75%. In other words, if you buy a coffee every day on your way to work, reduce it to 2 to 3 times per week instead.
What do you do with all that extra cash you save? Funnel it into your investments or liquid assets, or put it toward your debt. Just don’t let it sit there burning a hole in your pocket, or you may end up spending it on some other “want, not need.”
Got any other tips for scaling back on your budget? Let us know about it in the comments below!