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Six steps to clean up one's finances


Last updated 3/26/2020 at 11:56am

FALLBROOK – National Cleaning Week is March 22-28, and according to a recent survey by, more than two in five Americans will be spring cleaning this year to celebrate.

While residents may find themselves cleaning their home, Rebecca Gramuglia, personal finance expert with, recommended people spring clean other areas of their lives as well – like their personal finances. To help them organize and tidy their finances, consider using these six steps to achieve financial success this spring.

Step One

Set up a system for personal finances. Whether they track their spending on a spreadsheet, file away receipts and bills in folders or handle everything electronically, it’s important for people to keep all paperwork and digital data related to their personal finances together in a safe place.

From receipts, bank statements, medical insurance information and other important documents, create a filing system that works for you – whether it’s using a file box, a file cabinet or even a set of shoeboxes. If some of the files are electronic, make sure they are backed up, either on external drives or to the cloud. Plus, an organized tracking system will make gathering information for tax returns easier.

Step Two

Create a realistic budget, and stick to it. Setting a realistic budget is a critical step in getting personal finances in order. Not only does a budget help people control their spending and ensure they don’t spend more than they make, but it’s also the first step toward using their money well. It can also help them keep their spending priorities in check.

A basic budgeting tool is the 50/20/30 rule, which entails spending only up to 50% of after-tax income on essentials, such as housing and food; 20% on financial priorities such as debt repayments and savings; and 30% on your wants, such as vacations. Another way to view the 50/20/30 rule is as the Needs/Savings/Wants rule.

Step Three

Coordinate payments with paydays. The best way to feel in control of finances is by creating a bill calendar that correlates bill payments with paydays. If people find that one payday seems to have more financial obligations than another, space out bill payments by talking to the credit card company or lender to see if the billing cycle can be changed. This adjustment will help them meet all their payments without struggling financially for part of the month.

Step Four

Evaluate and pay off debt. Juggling debt payments on top of utilities, mortgage and other necessities can be difficult if people don’t stick to their bill calendar and budget. So, make a plan to tackle debt now.

Evaluate how much is owed and how much is paid in interest. Then, strategically pay off debt by adopting the debt avalanche method. This method requires debtors to make minimum payments on all their debts while focusing their main debt payoff on one single account.

With the debt avalanche method, a debtor pays off debt by interest rates instead of accrued balances. It is a more cost-effective method that targets high-interest debt first to save money in the long run. Then, as each debt gets paid off, its minimum payments get added to the monthly payments for the next high-interest balance on your list. By the time they get to the last debt on the list, they’ll be eliminating large chunks out it each month, speeding up the debt payoff process.

Step Five

Automate savings. Make saving money a top financial priority this spring. One of the smartest yet effortless ways for people to save money each month is by having part of their paycheck automatically deducted into a savings account or set up a regular transfer of funds. This way, they won’t be tempted to spend the money elsewhere.

Financial emergencies – such as a job loss, reduced hours, an illness, major vehicle or home repairs – can strike at any time, so set money aside in an emergency fund as well. Having an emergency fund is like having a security blanket. It eliminates any future financial stress and frustration when something major occurs and there might be a need for additional money that would normally be out of their budget.

Step Six

Plan for the future. It can be easy to get distracted with spending on the “now,” but these decisions can impact people’s financial future which can affect their credit score. So, whether they want to apply for a mortgage, purchase a car or open a new credit card in the future, their credit score is used to determine their creditworthiness. There are five main factors that determine a credit score: payment history, inquiries, average credit age, credit utilization and variety of accounts. Keep in mind that missing payments or applying to several lenders at once could drop a credit score significantly, and new credit card inquiries remain on your credit report for two years.

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