Isn’t it amazing how you’ll spend an entire back-breaking day cleaning your garage every few years and promise yourself that you’ll never, ever let it revert back into the cluttered mess that it was? Then, come next spring, your beautiful, spic-and-span garage has somehow de-evolved once again into something that looks suspiciously like a landfill.
Messiness can creep into your budget too! As your life changes and evolves, you may pick up new expenses, forget about old ones, or simply stop paying as much attention to your financial goals. This spring, as you prepare yourself for the monster task of cleaning out the garage (this time it’s really going to stay clean), consider spring cleaning your budget as well!
Step One: Assess the Situation
The most important action you can take is to simply sit down and review your budget for the last 6 to 12 months. Make an appointment with yourself for time for the review (give yourself at least an hour, but two is even better). Pull your credit card statements and any budget reports you’ve been keeping and make yourself a nice, strong cup of coffee or tea. Look through your reports and see how well you’ve been saving, fulfilling your financial goals, and sticking to your budgets. (Don’t have a budget yet? Check out this Budget Guide for Every Income.)
Step Two: Clean Out Un-Needed Expenses
As your life changes, you may find that certain expenses no longer make sense. Do you have a few magazine subscriptions to magazines that you never read? It doesn’t have to just be specific expenses. Maybe you switched jobs and don’t need a monthly budget for work clothes anymore. Get rid of that budget category the same way you’ll need to finally donate those box of old kids’ clothes in the garage.
Step Three: Re-organize
Have you taken on new expenses that aren’t expressed in your budget? Maybe you bought a home this year and have a mortgage. You’ll need to add a line item in your budget for this expense and make sure you can cover it with your earnings. Now is the time to reformulate. If you’ve earned a raise, that means you can add more discretionary spending. You may also realize that last year’s numbers were off. Maybe you need to give yourself a higher vehicle budget but a lower restaurant budget. Use last year’s spending to create a more accurate and organized budget this year.
Step Four: Create New Goals
Now that your budget is cleaned up and organized, it’s time to determine if you want to make any other major changes. If you have some extra funds left over, now is the time to start dreaming. Can you increase the amount you put away for retirement each year? Or perhaps you can accelerate paying off your credit cards or finally start putting money away for that two-week trip to Argentina you’ve always dreamed about. The beautiful thing about cleaning out your budget is that at the end, you’ll have a much better view of where your money is going and how you can funnel it to the things you really want. It’s just like the satisfaction you get from actually looking at your garage and being able to see the things you own.
Step Five: Re-commit
Unless you re-commit to actively tracking your budget on a regular basis (we recommend each month), your budget is going to get messy again, just like your garage, and you could end up spending way more money on the things you don’t really need and delaying achieving your money goals. Spring cleaning your budget is a great annual tradition, but it shouldn’t be the only time you look at your budget each year!
If you’ve been slacking off on holding yourself responsible, you might want to implement some measures to keep yourself honest. For example, schedule a monthly budget review in your calendar so you’ll always have that time free, create a contract with a friend to report your success or failure with them, or put in place a reward or punishment requirement depending on whether you keep your monthly budget or not. (A great one is to give a charitable donation to a cause you hate if you fail in staying under your budget!)
Another great option is to start a Money Club so that you can enjoy the benefit of being responsible to a supportive group of other women who are working to improve their financial literacy as well!