If your finances feel like they are unorganized and chaotic, it might be time for an overhaul.
If you are trying to figure out how to clean up your finances, a great place to start is to get organized and put some systems in place that will help you maintain some control and balance over your accounts.
These tips can not only help you get a handle on your financial wellbeing as it stands now, but also learn how to stay on top of your money and plan ahead for a successful financial future.
Taking a broad look at your finances can be the first step in getting organized. Understanding where your finances are currently, can give you the information you need to help you create a workable plan for your finances.
Ways to Clean Up Your Finances
1. Look at the Big Picture
The first step to help clean up your finances is taking a look at the big picture. It might feel overwhelming to track down all of your recent credit card statements, bills and accounts. But, seeing all of your income and debt in one place can really help you understand and come to appreciate what you own, and what you owe.
A personal finance management tool, such as SoFi Relay®, can help you view all of your accounts in one place.
These tools make it easy to set budgets based on previous spending, by linking your bank accounts, credit cards, student loans and more in one dashboard. Plus, SoFi Relay tracks your spending so you can better set spending goals and create a plan to help tackle debt or save more.
2. Set a Practical Budget
You can put a practical budget in place by following the tried-and-true 50/30/20 method. This rule of thumb can help simplify your spending categories. Rather than having hundreds of small budgets for individual items like shopping, dining out or household supplies, you simply divide your monthly income into three.
To start, 50% would be relegated toward necessities, such as housing, utilities, groceries and other essential bills. Then 30% is reserved for discretionary spending, like entertainment or eating out. Finally, the remaining 20% is for your financial goals, like savings or retirement.
It might be hard to change your spending habits at first, but putting strategies in place like a waiting period before hitting checkout on any online shopping could help.
3. Make Payments On-Time
One way to make sure your bills are paid on-time is to set up autopay. Since payment history affects approximately 35% of your FICO® Score, making consistent on-time payments could potentially benefit your score.
And if your bills are already accounted for in your monthly budget, you won’t have to worry about missing a payment or overdrafting on a bill.
If you find that you are running out of money before the month ends, try spreading out your bill payment dates throughout the month, rather than grouped all together.
Plus, many financial institutions may offer a discount for setting up automatic payments. You can also go paperless for the ease of getting notifications delivered straight to your inbox, rather than mailbox.
4. Cancel Unused Subscriptions
Once you have evaluated your spending habits and budget, it can be easier to spot any sundry subscription services you should cancel.
Whether it’s an unused Netflix subscription or an underused gym membership, take a look at what you are paying on a recurring basis and if you actually make use of those services.
There are even apps that offer help with cancelling old subscriptions or lowering your bills. By cancelling even just a few unused services, you could add back a substantial sum over the course of a year.
5. Make a Plan for Your Debt
If you are working on paying off multiple loans, you could consider consolidating your debt with a personal loan, or refinancing your student loans.
If you have debt built up across multiple credit cards, for example, the different interest rates and bill due dates can lead to confusion and missed payments.
One possibility to help simplify payments could be taking out a personal loan to consolidate high-interest debt, you could choose a new fixed rate and repayment term, possibly with a lower rate.
The same idea applies if you are considering refinancing student loans, for instance. Federal loans offer options like income-driven repayment plans you might want to consider, if you need a lower monthly payment, and forbearance options that private refinancing loans don’t offer.
Or you can consolidate multiple high-interest loans into one, or refinance your student loan debt into one loan. Part of your financial wellness should be getting control over how much you owe, and making a plan to get out of debt.
6. Review Your Current Investments
If you’ve had multiple jobs, you may want to consider consolidating your investment accounts, too. Having lots of old 401(k) accounts to keep track of separately may not help you make the most in the long run.
If you want to gain more knowledge and control over your finances, hopefully your initial review of all of your accounts uncovered if you have old investment accounts you’re no longer contributing to.
Rolling over your old 401(k) accounts and combining them into one IRA account, for example, can help clean up your finances.
Or, you can check with your current employer to see if you can roll over your previous accounts to your new plan. Be sure to compare the different investment choices of each account in order to make an informed decision.
Either approach can give you the simplicity of having all your retirement investments in one place. Not sure which option is the right choice for you? Schedule a complimentary call with a SoFi financial planner for personalized advice.
7. Commit to Regular Maintenance
Streamlining your finances in the present is just the first step. Pay attention to your accounts as time passes and continue checking in and adjusting your financial plan as needed.
8. Stay on Top of Your Credit Report
Putting great financial habits in place doesn’t mean just doing a spring cleaning refresh on your budget, investments or loans. Make sure you are also checking your credit report regularly. You can request your full, free credit report annually from each of the three major credit bureaus.
In between annual credit reports, you can usually check your credit score for free and without affecting your score through many credit cards, banks, or reputable online services like NerdWallet’s.
The reason it’s important to review your credit regularly is not only to make sure it’s accurate and there is no fraud, but also to see how it changes over time and what may be impacting your score the most. Since credit score is a factor that can impact many big financial decisions like housing, loans, and more, you want to identify any errors before too much time passes.
Building a credit history takes time, but checking your score can help keep you on track for your goals.
9. Review Insurance Policies
If you have life insurance or other benefits that require beneficiaries, review those designations at least once a year. With big life changes, such as the birth of a child, it can’t hurt to make sure that your beneficiaries are still correct.
Or, if you get married or remarried and change your name (or your spouse’s name changes) you’ll want to make sure that information gets updated as well.
10. Update Your Tax Withholding
Taxes are always going to be annoying, but why not make it easier for yourself and make sure you update your tax withholding as part of your regular financial maintenance so that your finances stay on track?
Take a look at your most recent taxes—did you end up with a too-good-to-be-true refund? Or maybe you owed way more than you planned for?
Review your information with a tax professional if you want to update your tax withholding so that you are getting the correct amount taken out of your paychecks for taxes.
Getting a smaller tax refund isn’t necessarily a bad thing either, as it might free up more money for you month to month as you earn it.
11. Maximize Account Benefits
As part of your ongoing financial health, you should review the benefits and features of your accounts, and see if an alternative account could help you earn, save and spend all in one place.
SoFi Money® is a cash management account where you can spend, save, and earn all in one place.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.