Want to give your finances a spring cleaning? First, get organized

Article originally published on: https://www.cnbc.com/

When spring cleaning this season, don’t forget to include your finances.

To start, you’ll want to get organized.

A cluttered house or cluttered mind can make you feel unproductive. It’s the same thing when your finances are disorganized, said Jamila Souffrant, creator of financial education podcast “Journey To Launch.”

“It is important to understand that you need to renew and relook at what is going on with your finances so you can enter a new season on better footing,” she said.

Decluttering can come in many forms, from sorting documents to better understanding and streamlining your budget. Not only can it help you get on track for financial success, it will help your overall sense of well-being, said Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners.

“When you are organized with your finances, your whole life is less stressful, ” she said.

While creating a system may take some time upfront, it will save you time and energy in the future.

“If you create a system that works for you now, then come next year you can really just repeat,” said Sun, a member of the CNBC Financial Advisor Council.

It’s also the perfect time to get organized since you’ll have to start getting your financial documents together for tax season. With that in mind, here’s how to get it done.

Reassess your budget

Even if you’ve already prepared a 2022 budget, it’s a good time for another look.

Review your spending, income and your savings over the past three months. What is working and what is not working? Take any lessons learned and apply that moving forward, Souffrant advised.

As spring blooms, you may also be tempted to change the way you spend money. In fact, 1 in 3 American consumers say they are more inclined to shop with longer days and more sunlight, according to a survey by RetailMeNot. The digital savings destination polled more than 1,000 U.S. consumers Jan. 20-21.

Take stock of what your financial life may look like over the next few months and make any changes in your budget to reflect that, Souffrant said.

If it helps you feel more organized, consider using a budgeting app. Souffrant prefers You Need a Budget, but said it only works if you put in the work it requires.

“You can’t be passive about it,” she said. “You have to make the time, go in there and update your numbers.”

Otherwise, you can create a spreadsheet and securely store it on an encrypted drive.

Declutter unnecessary expenses

You may be spending money on things you forgot about or don’t necessarily need.

Go through your expenses and see what could be cut. One place could be recurring expenses that are often forgotten about, like subscription services.

The nitty gritty

Looking at your financial situation and organizing how you are spending, earning and saving is just one part of the process.

It’s also important to actually be organized in how you are storing and accessing the information, Sun said.

She has a system she swears by that includes cardboard magazine files for sorting, a three-ring binder to store each year’s worth of documents, a hole punch, a scanner/printer and a small shredder.

Since many documents still come through the mail, and not just electronically, Sun uses the standing cardboard magazine files to separate everything — like bills, bank statements, receipts and tax statements — by category. Each one is on her desk and labeled.

About once a week sort through each file, shred what you don’t need and scan the documents you want to keep onto an encrypted drive, Sun said.

The only thing to physically hold onto is banking items like checkbooks, as well as your estate plan and mortgage documents, since they are large and will take too long to scan, she said. Any printed annual documents, like tax returns, can go into a binder labeled with the year.

“Think of your household finances as if you were going into a shoe store,” she said.

“Imagine going into the back room of that shoe store, and they can easily find the shoe and size,” Sun added. “Use the same concept when organizing your finances.”

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