Warmer weather is around the corner, and with it comes a chance to clean out the old to make room for the new. And the same goes with your finances.
If you want to start improving your financial picture, it’s time to think about spring cleaning. Take steps to organize paperwork and records, and look at your debts to see if there are ways to pay them off in full or effectively reduce them. When you do that, you’ll be prepared to start addressing your credit, making this the year that you reach the score you’ve always wanted.
Just as you would with your home, dedicate a few hours a day to spring cleaning your finances and you’ll have a clear picture of where you stand.
Setting up an automatic transfer to your savings account
When was the last time you contributed to your savings account? Can you remember the amount you added?
It’s rare to find a person who doesn’t want to increase their savings, but at the same time, it’s easy to forget that you are the one who has to do it. Having a savings account is a good start, but it’s just as important that you set up regularly occurring transfers to that account to ensure it keeps growing, even when you’re not paying attention.
There are a few easy ways that you can set up transfers to give you peace of mind:
- Transfer between accounts: Most banks will allow you to set up automatic transfers between any linked checking and savings accounts you may have.
- Allocate part of your paycheck:If you have direct deposit set up for your paycheck, consider having a portion of it put straight into your savings. Whatever the amount is, you’ll save it without even thinking.
- The piggy bank method: If you don’t have any linked accounts or direct deposit, every time you pay for something, put the change in a jar. You’re essentially rounding up the cost of each item, which is what many banks offer with their automated programs.
- Save your cash-back rewards: If you have a card that offers you cash back on purchases, put that extra money directly towards your savings.
Discarding old financial paperwork
According to the IRS, you should keep tax return documentation for between three and seven years. Keep in mind that the IRS has three years to perform an audit after you submit, so any applicable receipts, W2s or other tax reporting statements should be kept for this term. It’s also advisable to keep your prior tax returns and proof of any payments made for as long as possible.
However, many financial documents you may be holding onto might not be necessary. If you have these records sitting in a drawer, it’s time to go through and see if any are unnecessary. If you store documents on your computer, consider getting an extra hard drive or another secure way of keeping your data protected; this way, you can even scan and save past documents if you’d like to maintain your records for longer.
There are, however, certain financial documents that you’ll want to keep around forever (or at least for as long as they apply)—and in most cases, you’ll need the original. These documents include:
- Birth certificates
- Social Security cards
- Marriage certificates
- Citizenship papers
- Divorce records
- Vehicle titles (if you own a car)
- Property titles
- Home loan documentation
- Leases for rented property
- Insurance policies (when valid)
For other types of paperwork, it’s often advisable to keep them until you have a more permanent record, such as:
- ATM receipts until the transaction is recorded
- Deposit slips until money appears
- Credit card receipts until your statement arrives
Depending on your tax situation, some of this documentation may be needed for longer to confirm any deductions or credits. Other documents you’ll want to keep around until tax time include:
- Pay stubs to verify with your W2
- Utility bills for business deductions
- Bank statements with copies of checks
- Medical and dental receipts
Now that you’ve identified some paperwork to clean out, what should you do with it? According to the Federal Trade Commission (FTC), the best way to dispose of financial data that includes your social security number or account information is by shredding it. If you don’t have a shredder, look for community events that offer to destroy documents, or a local service that will take care of your needs for a reasonable fee (typically less than $1 a pound.)
Consolidate credit card balances
When you have multiple accounts to manage, you’re running the risk of missing payments, growing balances and increased debt. Instead, consider consolidating your credit cards into one, which can help you address any balances while also streamlining your money management. The simpler your accounts are, the simpler it is to improve your finances.
A balance transfer credit card is a way to consolidate your other cards in one place, with a new lower rate. The benefit of most of these cards is that they come with a promotional rate, typically 0%, which means you can focus on paying down balances without worrying about interest.
But a balance transfer card isn’t the right decision for everyone. If you’re holding a lot of credit card debt, you may not be able to find a card with a high enough credit limit to accommodate all of your balances. Plus, if you can’t pay off your debt or get it into a manageable range within the promotional period, you’ll be susceptible to regular, or even higher rates. You’ll also need to qualify for a new card, so if your credit is less-than-stellar, you may not be eligible for low-enough rates or high enough credit limits to make the transfer worth it.
Commit to improving your credit
Ultimately, one of the goals you should set for your finances this year is to improve your credit. Great credit means the ability to access loans with preferable rates, and less concern over racking up massive interest.
But if your credit has taken a hit in the past, it may seem impossible to reach those excellent credit levels.
When you have poor credit, it’s harder to qualify for everything from a home loan to a credit card. But you also need credit to improve your credit, which can feel like a catch-22. Luckily, there are tools available that are designed to help those with credit problems regain their creditworthiness.
Start by getting into the habit of checking your credit report for free from each of the three bureaus every year. Look for errors and places where you were penalized for things like missed payments. Once you know where you stand, you can start taking steps to improve your score.
A secured credit card like the Green Dot® Platinum Visa® can be one of the easiest ways to start improving your credit with responsible use. If you’ve had trouble with credit cards, you may be wondering about another one, but a secured credit card is different from traditional ones. As the name implies, these cards are “secured” by a deposit; whatever you deposit is your credit limit on the card. You’ll be restricted to spending whatever amount you put down on your security deposit. However, what is most beneficial about secured credit cards for individuals with credit problems is that like with traditional cards, your information is reported to the credit bureaus.
If you’re ready to clean up your finances, take the first step by getting the right tools to help you succeed. Get your Green Dot® Platinum Visa® today. Check out Green Dot’s simple fees before applying.