7 tips to do a financial clean up

Delay no further! Start today!

A routine weekly clean up at home involves clearing things from the way, getting rid of the dust and scrubbing surfaces squeaky clean! ‘Looks messy? Then clean it up’ is the mantra we go by when it comes to cleaning our homes. Unfortunately, this approach is not extended to financial cleaning.

Read on to know how to clean up the financial mess before it gets messier!

A situation which is financially messy, generally doesn’t grip us unless we are already neck deep in the mess! Now that’s one thing we must all steer clear of. An approach to cleaning, in general, is reactive. But financial cleaning is one thing that has to be done proactively.

Check out these seven tips to clean up your finances and become a pro at managing money!

1. Get a financial planner

Yes. You need an exclusive planner to organise your finances. Financial planning definitely cannot share space with grocery lists and birthday reminders in your day to day planner. Your hard earned money deserves special attention.

Use this planner specifically for chalking out the details of your finances. Premium payments, outgoing bills, EMI dates, FD records, etc can be tracked by diarising it here. Organise well and set up a process to track dates and documents. Free you mind space by jotting it all down in the planner.

2. That important number

Obviously we are referring to the CIBIL score! Regularly checking this score should top your list. However, this activity easily gets ignored unless we need to submit the score for evaluation.

At that time it’s too late to take any corrective action if the score is not up to the mark. Checking your CIBIL score regularly gives you a fair idea about how institutions are going to perceive your financial health.

In case, you have to apply for a loan in the near future, problems which may arise due to the CIBIL score can be resolved in advance. An action plan to improve the score can be drawn up and implemented if we track the score regularly.

3. Clear your debts

List down all the debts and then calculate the interest you are currently paying on each one. Also, evaluate how long you may have to continue to do so.

This can be an eye opening activity! You shall see that few debts are turning out far too expensive.

Figure out if you can clear any of these in the near future and draw up an action plan. Re-organising your debt can be a game changer! Pay off those debts and dodge the money black hole called interest payment.

4. The magical tool- Budget

If you don’t have a budget planned yet then stop everything and do it now! Budgeting helps limit your expenses.

It’s a good idea to have monthly budgets and a review session every quarter. During reviews, check if the budget is helping you save and is in sync with your short and long term financial plans.

Riding on a good budget is essential to reach your financial goals.

5. Is you retirement planning on autopilot?

If you answer is ‘yes’, congratulations! Because at least you have a retirement plan in place! In case you haven’t planned it yet, this is your red flag.

Retirement planning is crucial because that’s when you will be reaping the benefits of all the years of hard work. Putting your retirement plan on autopilot is a good way of believing that you are on the right track. Well, hold on!

Investments which are a part of the retirement planning need to be re-visited and re-evaluated periodically. How else will you know if the funds are going to be sufficient to lead a comfortable life if not for a dream life?

This is a long term plan and definitely calls for good planning and smart thinking.

6. Investing time can double your money

To invest smart and invest better, one needs to be aware of the various options available. Hence, invest your time in educating yourself.

Speak to experts, subscribe to good financial magazines, follow blogs and sign up for updates on finance websites. Knowledge about financial products can help you choose a better product while being aware of the risk involved. That way you will also feel more confident about your finances.

As we know, knowledge is power. Investing time in gaining knowledge will definitely fetch rich dividends.

7. Open new doors

It’s easy to get into a rut while facing the daily grind.  But do not let this block your thought process for coming up with new and creative ways to make more money! Think about what you are passionate about and find ways to monetise it.

Work on your hobbies and take up classes to learn something new. Today, where the work environment is so dynamic it is important to have a plan B ready. And you never know, you may be one of the lucky few whose business is to do what they love and do it to the best of their ability.

So have an open mind and develop new revenue streams.

Make regular financial clean ups your obsession and we promise you a heavier wallet and lighter mind. Delay no further and start today itself. After all financial management is all about smart planning and organising. The points mentioned above will definitely help you in that. Good luck!

Illustration: Uttam Ghosh/Rediff.com

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.