NEW YORK – With the change of seasons, it might be a good idea to think about spring-cleaning your finances.
Getting your papers in order – and then making plans for handling your debts and boosting your savings – can put your fiscal fitness program into high gear and relieve a lot of anxiety.
“For many people, the reason they’re keeping their financial life in chaos is that they really don’t want to know how bad their problems are,” said Catherine Williams, a credit expert with Money Management International, a Houston-based financial counseling and education agency. “It’s pure avoidance, and it can only make things worse.”
Unopened bills can lead to late charges on credit card bills, misplaced receipts can mean missed tax deductions, and lack of attention can result in missed savings opportunities, she points out.
Williams recommends consumers set up four bins – which can be baskets, large envelopes, file folders or shoe boxes – to keep track of their financial papers.
The first should hold documents that need to be kept long-term, such as insurance policies and a home mortgage or apartment lease. The second is for receipts and other papers that have to do with taxes, including receipts for charitable contributions and W-2 wage statements.
The third is what she calls the “60-day basket” for paid utility bills and other statements that can be thrown out when the next one comes in.
The last is the “30-day basket” or “action basket” with all bills that need to be paid or deposits that need to be made.
“If you really want to make it easy on yourself, put a calendar, pens and pencils, stamps and envelopes in that 30 day basket so everything is in one place when you sit down to work,” Williams said.
Once your papers are in order, one of the first tasks many consumers must face is dealing with credit card debt.
“We know we shouldn’t collect credit cards like we do greeting cards, but a lot of us do,” Williams said. She recommends consumers consider cutting back to two – one for regular use and a second for true emergencies because “that’s really all we need.”
For those with more cards and lots of debt, Williams suggests making a list that includes the name of the creditor, the interest rate being charged, the total amount owed and the minimum monthly payment.
“Your commitment must be to not let that balance go up,” she said. “The way you get out of debt is with consistent payments that are higher than the minimums. As you pay one (creditor) off, cross it off the list and take the money you were paying that one and apply it to next one.”