Easy Spring Cleaning Tips for Your Finances

May 25, 2016

One of the pleasures of spring cleaning is the feeling of getting a fresh start. Most people associate spring cleaning with their homes, but your finances could also benefit from some sprucing up.

While there are many areas of personal finance you could tackle, sometimes just focusing on the “lighter” tasks can make a huge difference.

Let’s see how the physicians in the following scenarios would benefit from a bit of financial spring cleaning.

Organize your accounts

Scenario 1: Dr. Martin, 43, is a family physician who recently went through a divorce. Her ex-husband had been in charge of household finances, and during their marriage had opened up different accounts for her, often in response to promotional offers.

Dr. Martin now has two RRSP accounts, one TFSA, and two non-registered accounts at five different financial institutions. Her paper statements are filed unopened. Her online statements are ignored. Dr. Martin is not sure how much money she has or what she has invested in.

Spring cleaning solution: A fundamental part of spring cleaning is decluttering and creating order out of chaos. With accounts spread over five different financial institutions, it is difficult to see the overall picture.

One solution for Dr. Martin is to consolidate her accounts at one financial institution. That way, she and her financial advisor can look at all the investments in aggregate and decide on the proper allocation and diversification.

Inspect your budget

Scenario 2: Sylvie, 23, is a first-year medical student who is counting on student loans and a line of credit to get through medical school. She would like to graduate with as little debt as possible. At this point, she expects to owe $100,000 by the start of residency.

Sylvie created a budget for herself. After tuition and fees, she allocated about $2,000 a month for living expenses. But already, in her first year, she estimates she is over budget by about $300 a month.      

Spring cleaning solution: A good spring cleaning task for Sylvie would be to examine her budget closely. She can start by separating her expenses into two categories—basic living expenses (e.g., housing, food, transportation) and discretionary expenses (e.g., entertainment, eating out, gym membership, cable TV). When it’s all laid out, she can better decide where she can make compromises and where to reduce certain discretionary expenses, so she can get back on track.

Stay on track

Scenario 3: Dr. Roy, 33, is an anesthesiologist who is already thinking ahead to retirement. Although he feels he’s a conservative spender, he is not saving as much as he had hoped. Thanks to his parents’ support, Dr. Roy graduated from medical school with little debt. Not long ago, he and his wife bought a house in a small city and now they’re expecting twins. Despite his comfortable income, Dr. Roy wants to ensure he is living well below his means.

Spring cleaning solution: Dr. Roy would be wise put a disciplined savings plan in place. While he is in a good starting position, it’s easy to let things slide as time goes on. Dr. Roy can keep his finances in shape by reviewing his budget and determining how much he can save—for his and his wife’s retirement, as well as for their children’s education.

He can then set up automatic savings plans. This disciplined savings strategy means that every time Dr. Roy gets paid, he diverts a certain amount to his savings and investment accounts automatically, to support his savings goals. Pre-authorized contribution plans are convenient and usually easy to set up, and Dr. Roy can choose the frequency that works best for him.

Financial planning involves time, discipline and awareness. For the best results, work with a financial advisor to create a customized plan.

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