By Marc Shaffer
Spring is here – the time of awakening and starting fresh – hence the reason we also start to think about spring cleaning. Now typically, this could mean tidying a garage that was stuffed with all the yard items from last summer or scrubbing areas of our house we often ignore. But now would also be a great time to think about spring cleaning your finances.
Are you ready to rethink some budget items, get your affairs in order and start fresh for the rest of the year and beyond with a spruced up financial focus?
Starting with one of the obvious financial chores we sweep under the run, spring brings about tax season.
If you’re going to be looking at a potential refund, you’ll want to determine the best place to invest those funds. Is your emergency fund fully funded? Are you facing any debt? Maybe you always add refunds to your IRA or maybe you look at goals or pre-planned expenses you’re behind in funding. Having a plan in place can be helpful when receiving any large amount, whether it’s a refund, bonus or inheritance.
Another thing to consider is if you should start making estimated federal income tax payments. While traditional workers often have this handled by their employer, self-employed workers or those with outside income might need this option. If you have a new venture that meets this situation or if you were penalized last year for underpayments, you’ll want to have your tax affairs in order moving forward.
One last thing…how easy was tax preparation for you this past year? Were you scrambling for receipts, calculating things into the wee hours before deadlines? If it didn’t go smoothly, now is the time to develop a new system for the next year.
Ok, now let’s get some bins ready to organize your budget!
How has your budget been working for you this past year? Are you sticking to it or did it become a jumbled mess? Are you saving enough in the accounts you intended to fund your future goals or do you feel like your savings needs to ramp up?
If you don’t have a budget or it’s gotten out of hand, start by utilizing a method for viewing and updating your budget - the right method is always the method that works for you. Next, take a look at the categories where you’ve been spending within your budget and those where you’ve been spending outside of your budgeted amount. What are some actions you can take to clean up those areas of overspending? This doesn’t always mean tightening up in those areas. You could have the budget for certain categories set too low and others too high, so sometimes just adjusting the buckets can help you stay on track.
Take a look at bills you pay monthly, such as property casualty insurance, lawn services, life insurance, etc. Some might offer discounts if you pay them annually rather than splitting it up into monthly payments. If your budget allows, you can take advantage of these discount opportunities (perhaps with your tax refund!)
You might also dedicate time for reviewing your home mortgage escrow to make sure you’re adding enough to keep up with the increase in property taxes tied to the value of the home (which has also been increasing over the last few years).
Now let’s discuss an ACTUAL spring cleaning consideration – patio furniture! I have heard time and again that people don’t realize how much of an investment outdoor furniture is, and that it can cost several thousands of dollars. This is the time to consider pre-funding major purchases. Not only could this tip help if patio furniture is in your future, but it could help you with any goal. Perhaps you’re thinking bigger, like a brand-new patio or adding a screened in porch to your home. Start by determining an estimated cost of the project or item and then divide the cost by the number of months before you need to make the purchase. That is the number you need to save every month in order to avoid using debt for whatever it is you want to buy. Ex. If I want new patio furniture by April of 2024 and the cost will be $3,000, I’ll save $250 per month until I make that purchase ($3,000/12 months=$250).
Just as spring cleaning the tiniest area of your home can feel like a huge personal success, spring cleaning any piece of your financial plan can also feel like a big win. I encourage you to start somewhere, even if you just pick one piece to tidy up this spring.
Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.
The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.
Originally published for the KC Star. Published for the blog on June 12, 2023 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.