9 Key Signs It’s Time To ‘Spring Clean’ Your Finances
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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While spring may be well in the rearview now, there’s never a bad time to review and update your finances the way you might clean out a closet or reorganize your home. In fact, the end of the year is an excellent time for a financial overview as you prepare for tax season.
Experts shared how to recognize when it’s time to give your finances a thorough refresh.
1. Missed Payments or Overdraft Charges
The first sign that you need a financial review is a late payment or overdraft charge, followed by an interest charge or fee, according to Michael Sullivan, personal finance consultant at Take Charge America.
He added that your money should work for you, not against you.
“Thanks to cash-back features, credit cards should present a financial gain every month, and there are banks and credit unions that do not charge fees for regular services. Banking should be free, and bank fees should be a red flag,” he said.
2. Running Out of Money Each Month
If you’re reaching the end of each month with little left in your account and juggling multiple credit card balances, it’s time to reorganize your finances, said Ruchi Pinniger, founder and CEO of Watch Her Prosper, a financial consulting company.
“Start by looking at how much is coming in and going out each month. Let go of judgment. See this simply as information. Then step back and think about your short- and long-term goals. What do you want? How and where do you want to live? What brings you joy?” she said.
3. You’re Avoiding Your Bank Statements
If you’re avoiding your financial statements, this is what Sullivan called “the traditional sign of complete collapse.” He added, “Consumers who cannot even look have given up and are about to face serious consequences.”
Pinniger said the first step toward a financial refresh is a mindset shift. She recommended an approach she calls her “RIR Method” — recognize, interrupt and reframe:
- Recognize when you are having a negative money thought.
- Interrupt it.
- Reframe the thought with a more positive one.
For example, replace “There is so much debt and never enough money in the bank” with “There is always enough to pay the bills. I am so grateful.”
4. You Have Anxiety About Money
A less severe but still important indicator that you need to review your finances is persistent anxiety about money that affects your sleep or health, Sullivan said.
“Consumers who worry about money to the point that it is impacting their sleep and health need to get help immediately, regardless of their actual financial condition.”
5. You Have Significant Debt and Decreasing Savings
Debt is another major warning sign, Sullivan said. “If debt is increasing, or even not decreasing, that is the worst sign of financial distress.”
A decrease in savings is the second-worst sign. “Savings should increase each month unless there is an emergency like an illness, accident or job loss,” he said.
Not knowing whether your debt or savings are changing is also a red flag — it indicates confusion and the need for external help to get organized, he added.
6. You’re Putting It Off Because You Think It Takes Time
Normal financial maintenance is easy. Just updating your budget with actual expenditures, filing receipts and checking account balances should be a monthly routine that takes about 30 minutes at most.
If you can’t compute your net worth in 30 minutes or less, you need a reset. And if you haven’t done routine maintenance in four months or more, you’re starting over, Sullivan said.
7. You Don’t Have a Financial Plan
Every consumer should have a financial plan, Sullivan said, one that includes goals for retirement and other key life events.
“That plan needs to be reviewed each year and every time there is a life-changing event. Recent increases in inflation, coupled with uncertainty about the future of Social Security, should cause consumers to consider increasing their savings goals for retirement.”
8. You Don’t Have an Emergency Fund
If you don’t have an emergency fund with enough to cover three to six months’ worth of expenses, it’s time for a review, Sullivan said. “Any consumer who has not increased emergency fund contributions is taking a risk. Emergencies today cost far more than they did a few years ago, and a few thousand dollars won’t cover many things like illnesses and accidents.”
9. It’s the End of the Year
Any time is a good time to review your finances, but everyone should do an end-of-year checkup, Sullivan advised.
“New Year’s Day is the perfect time to review the plans you made for the year and compare them to actual results.”
He suggested comparing what you owe, what you spent and what your assets are versus the previous year, then setting new goals for the year ahead.
Whether it’s spring, year-end or anytime in between, taking the time to “clean up” your finances can reveal hidden problems, reduce stress and set you up for a stronger, more confident financial future.
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