I always dreaded spring cleaning time when I was a kid. My mom always assigned rooms to each of my sisters and me. I remember our bathroom. The bathroom four girls shared. My mom took cleaning seriously too. She would inspect my work and send me back to do a better job if I didn’t have all the nooks and crannies cleaned and disinfected perfectly. I swore that as an adult I would never put myself through “spring cleaning” voluntarily.
Now that I’m a mom myself, I understand. We do spring cleaning once a year because drawers start to fill up with miscellaneous papers, toys, pieces of toys, crumbs, and other clutter. It is liberating and healthy to, once a year, do a power-clean in order to reprogram to factory settings.
Spring cleaning can be applied to other areas of your life, too. It has the same effect.
Here is a spring cleaning list for your finances:
1. Make sure you have adequate insurance coverage
Have life insurance policies on you and your spouse. It doesn’t matter if one of you stays at home with the kids. Nor does it matter if only one of you is the primary income-earner. Both of you need to be insured.
It’s obvious why the primary income-earning spouse needs to have life insurance. Their income needs to be replaced in the event that something happens to them. So that their family is taken care of.
But, why does the non-bread winner spouse need to have life insurance? Because the spouse that is not the primary income earner does A LOT of work that doesn’t earn a paycheck. They do the grocery shopping, the laundry, the errands, the school runs, the piano lessons, the cooking, the cleaning, and the never-ending wiping of the kitchen counters. If something were to happen to them, the surviving spouse will need to hire help with these things. While on the surface a stay-at-home mom/dad doesn’t contribute to the family income, in reality their role is significant. They need life insurance too.
What kind of life insurance? There are many different kinds of life insurance. Depending on which financial guru you follow, they have strong opinions about this. I’ll reserve my opinion for another blog post, but suffice to say that I believe that the decision should be based on the specific situation of your family. Contact me at firstname.lastname@example.org if you want more info on this.
2. Do you have overdraft protection from a secondary account?
Do you have a savings account or a secondary checking account? At your main bank, that your main operating checking account is, it’s a good idea to have a secondary account.
This secondary account could be a savings account, for your emergency fund. Or, it could be a separate checking account that you are using to save money for a specific purpose.
For me, I have a secondary checking account that I use to save up money to pay for a large bill I receive annually.
Your bank probably has a service where you can link this secondary account to your main checking account, as “overdraft protection.”
I called into my bank to ask them how to set this up. They walked me through the steps on the website to set it up myself (apparently they can’t do it themselves?). Your bank may operate slightly differently. Call. Ask.
Why go to the trouble of setting up overdraft protection? It gives you peace of mind. When I have a month where money is tight, I know that the worst case scenario (if I dip below $0 on my account) is that my secondary savings account kicks in to save the day. Yes, I will have spent some of my earmarked savings account, but I can refund that as soon as the anticipated money gets deposited.
It is comforting knowing that I will never get fined an overdraft fee from the bank. Nor, will I suffer the embarrassment of seeing the overdraft in red numbers on my account. It has happened to me a few times in the past, and I still remember the mental bully I subjected myself to, because of it.
Setting up overdraft protection = problem prevented.
3. Check in with your financial planner.
If you haven’t spoken with your financial planner in a while, it’s time to get reacquainted.
Don’t wait for them to call you. Call them. Give them updates on family life.
They may pick up on changes that will require a tweak to your investments or financial plan.
This also will keep you engaged to stay true to your financial plan. The secret sauce of financial plan success is commitment and consistency.
4. How is your emergency fund doing?
If it’s not fully funded, work on filling it back up.
A good amount to aim for in an emergency fund is 3-6 months worth of expenses.
Why do financial experts continually give this order? Because it is THAT important. We all have unexpected expenses, that do not fit within our normal monthly budget. How are you going to pay for it? If you don’t have extra money set aside for a rainy day like this, it will be tempting to put it on a credit card. It’s easy for that cycle to spiral out of control.
It’s easily prevented by creating and maintaining an emergency fund. If you don’t have one, set one up. If you have one, but it is not yet to the 3-6 months of expenses amount, focus on funding it for the next few months.
I’m proud of you for taking the time to SPRING CLEAN your finances. It may seem inconsequential now, but I tell you -- it will have a BIG impact on your long term finances.
P.S. Check me out on KDLT News in Sioux Falls giving these Spring Cleaning Tips: