Here’s how to start planting the seeds of financial success

With spring around the corner, there’s no better time to start on the path toward financial wellness.

For many people, spring means the chance for a fresh start. Add in the two-year anniversary of the Covid-19 pandemic, and the urge to take control, declutter and start anew may be stronger than ever. So why not apply that to your finances as well?

“It is absolutely the ideal time,” said certified financial planner Diahann Lassus, managing principal at Peapack Private Wealth Management in New Providence, New Jersey.

That’s because it is also tax season, which means you are likely already focusing on your finances.

“You have an opportunity to have all those documents in one place to really get a gauge of where you are,” she explained.

Here’s how to get started.

Start with figuring out your total income, including any salary, stock dividends and gifts. Then, look at where all those dollars are going, said Lassus, a member of the CNBC Financial Advisor Council.

“I’m not talking about getting down to nickels and dimes, but you really need to look at the total,” she said. “How much goes to taxes, how much goes to spending and is there anything left over to save?”

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Then, think about what’s going to change this year and incorporate that into your budget, Lassus said. Will your income go up, will housing costs change or will school costs increase?

If you need to adjust, look at things in your budget you can do without, like subscription services you may have added to stay entertained during the pandemic, said Berna Anat, a San Francisco-based financial educator and content creator.

You can also look at stretching your income by taking on a side hustle, asking for a raise or looking for a new job, now that job seekers are in the driver’s seat amid the “Great Reshuffle,” Anat said.

You may be tempted now to go on a spending spree after being cooped up over the past two years. Think about what you really want to spend money on — and build a budget around that, Anat said.

“When you’re intentional about what it is you want to spend your money on … you can be much more focused and controlled,” she said.

“Your wallet will come out the other side thanking you.”

If you aren’t fully paying off your credit card each month, you may not have a real sense of your monthly spending. You’ll also be racking up interest charges.

“Always know where you are with those credit cards, understand what the cost is over time,” Lassus said.

How to pay down debt depends on your situation.

Anat prefers what she calls the “shaved ice method” — a combination of the “snowball method,” which focuses on repaying debts from smallest to largest, and the “avalanche method,” which focuses on paying the debt that has the highest interest rate first. She suggests paying the card with the smallest balance first to get a sense of accomplishment, then switching to the highest-interest rate card, and switching back and forth as needed.

“Can you stay motivated on your goal?” Anat said. “Can you stay consistent?”

“Besides a bigger income flow, that is the No. 1 thing that will help you see your debt payoff goal to the end.”

Another option is to transfer the balance to a zero interest rate credit card, as long as you are committed to paying it off and not racking up more debt.

Don’t spring-clean your finances by yourself. Instead, have conversations with friends and family, Anat suggests.

“When we do things in isolation, we further the narrative that money is supposed to be private and shameful,” she said.

“When we acknowledge money issues and our money feelings as a community topic, it just really relieves the pressure on yourself.”

The pandemic highlighted the importance of having emergency savings. Try to start putting money aside to build cash reserves.

At the same time, it’s also important to save for retirement. Review your 401(k) options if your company has one. If your employer provides a matching contribution, try to contribute as close to that match as possible, Lassus recommends.

Experts stress the importance of both forms of savings. Yet, if you are strapped for cash, deciding if you should pay more attention to one over the other depends on where you are in life, she said.

For younger people, an emergency savings may take precedence since they have no other investments to fall back on in an emergency, Lassus said. Older people, on the other hand, hopefully will have some other investment accounts to lean on in a pinch, she said.

While it may not seem exciting, getting your financial life in order will not only help you weather short-term storms, but can set you up for financial success in the future.

“Most people spend more time planning for their vacation than they do their financial life,” Lassus said.

“Think about your finances in the same way and think about how much more important those long-term finances are.”

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