Spring Cleaning

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The weather finally is getting warmer, the clocks have sprung forward, and it’s time for some spring cleaning! I enjoy cleaning out my closet as much as the next gal, but let’s get serious. Spring is a time for cleaning up everything, including those pesky personal finance tasks that you’ve been putting off.

Here are a couple of things you might want to consider getting done to complete your spring cleaning:

  1. Finish your taxes. If you didn’t do it yet, do it soon because the deadline is April 15. Be sure to use a tax professional to help you get the most deductions possible.
  2. Get a handle on your debt. Start organizing bills and stop putting them aside. Figure out how much you owe everyone, figure out what debt has the highest interest rate, and focus on paying down that debt first.
  3. Clean out your closet and donate the clothes you haven’t worn in 24 months. Did I mention that charitable donations are tax-deductible?
  4. Shop around for insurance. Have you been using the same company for 5 years without comparing rates? You might be able to reduce insurance rates by comparison shopping.
  5. Cancel subscriptions that you don’t use. Have you been receiving a magazine you don’t care for anymore? Are you still subscribing to xBox live even though you don’t use it? Cancel the subscriptions and stop paying for service you don’t use.
  6. Compare shop for cable/internet. Some companies offer a deal if you “bundle” cable/internet and commit to a year or two long contract. If you are feeling really adventurous, cancel cable completely and try using Hulu/Netflix.
  7. Check on your cell phone usage. Is there a new plan available that can better suit your needs? If you cell phone plan expires soon, ask yourself if you really need that fancy new smartphone. Odds are, you don’t.

You Need an Emergency Fund. Really, You Do!

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I was recently talking to a friend who told me that she never learned how to save money. Her family never saved, so she never saved. I learned that her family’s financial mantra is “you can’t take your money to the grave, so you might as well spend it today.” Although I’ve heard this philosophy, I was surprised to know that someone so close to me believed it!

Knowing this wasn’t sound financial wisdom, I decided to introduce my friend to the phrase “saving for a rainy day.” It refers to the idea of a savings account where you stash enough money for a “rainy” (crappy) day. Things that could cause said “rainy” day include unexpected emergencies such as getting laid off, illness, large unforeseen expenses (car accident, leaky roof, etc.), and so on. The purpose of the emergency fund is to provide you with the resources to deal with the unexpected challenges that life can something put in your path.

There is a general rule of thumb for saving up enough money to deal with the unexpected. Most financial planners will tell you that you need to save up enough money to cover three to six months of expenses (rent/mortgage, transportation, food, bills, etc.) for your emergency fund. The money in this fund should be liquid, meaning you can quickly, easy access it. This way, if you are laid off/get sick/incur a large expense, you can easily withdraw the money you need to support yourself while you get back on your feet.

If the idea of saving up six months worth of bills seems overwhelming, start out by setting a series of more immediately attainable goals. Try to start by saving up one week’s worth of expenses. Once you’ve got one week, work towards saving up one month’s worth of expenses. From there, work towards two months, and so on. Setting up attainable, incremental goals will help you feel feel good about the milestones you reach on your way to setting up your emergency fund.

It’s true you can’t take your money with you after this life, but setting up your emergency fund can help you deal with the financial challenges that life brings. You never know when your “rainy day” will come, so get prepared and start saving.