Ahhh… the birds are singing, the butterflies are flitting, and the days are growing warmer and longer. There is no denying it; Spring is in the air! And that means it’s a good time for a personal finances spring cleaning!
This year especially, after a tumultuous year of the pandemic, here are five tips from Nerd Wallet for cleaning up any financial messes you may have gotten yourself into since COVID-19 hit hardest last Spring.
Update Your Budget
Your spending patterns might have totally changed over the last year. According to the Federal Reserve Bank of St. Louis, travel, hotel, restaurant, and bar spending fell during the pandemic, while grocery and beverage store spending went up. So it may be time to create a new budget that reflects current expenses, says Curtis Bailey, certified financial planner and founder of Quiet Wealth Management in Cincinnati. “Covid changed spending patterns last year, and potentially going forward,” he says. He suggests anticipating what habits you plan to continue beyond the pandemic. He also suggests avoiding any drastic changes, such as buying a second home, until you’ve done a thorough analysis of your needs going forward.
Set New Financial Goals
Now, as the pandemic is easing, you might want to set new financial goals. For example, finally take that big vacation or find a job that allows you to continue working from home. “You may be reeling, trying to figure out your direction again. Ask yourself what is truly important and whether your current spending reflects that,” suggests Andrew Mitchell, CFP and financial advisor at Fiduciary Financial Advisors in Grand Rapids, Michigan.
Zero Out Mobile App Balances
Given the rising popularity of payment apps like Venmo, PayPal, and Cash App, it’s a good idea to check your balances. NerdWallet found that about two-thirds of mobile payment app users say they have maintained a balance in their accounts. This means they aren’t earning interest on that money. Instead, consider transferring your cash into a high-yield savings account.
“Interest rates are low right now, but if you get into the habit now of moving money into your savings account, when interest rates rise, you will see a bigger impact,” says Newton.
Because of all the time spent at home, many families increased spending on subscription services like Disney+, Netflix, and HBO. As we all start to leave the house more, it might be time to scale back, suggests Jason Dall’Acqua, CFP and president of Crest Wealth Advisors in Annapolis, Maryland. “Cancel the subscription services that you will no longer be using as much and realign your budget with more normal circumstances,” he says.
Review your insurance coverage
The pandemic has had a big impact on our homes. Not only are we spending more time inside them, often with more expensive technology and other items to help us work or attend school from home, but housing prices have also increased. According to the Federal Housing Finance Agency, home prices rose 10.8% between the fourth quarters of 2019 and 2020. You might need more insurance coverage than you currently have, says Noah Damsky, principal of Marina Wealth Advisors in Los Angeles.
Remember, Spring cleaning your personal finances is like taking the time to air out and spruce up your home. It won’t happen by itself. You have to choose to do it, or the dirt will just accumulate!