When it comes to the calendar year, it’s important to review your financial situation before it’s too late to make impactful changes. I recommend doing a quick ‘financial clean up’ during the month of September, so if you find things that need to be fixed, you have plenty of time to resolve them prior to a high-spending holiday season or start of a new tax year.
Here are a couple of key areas to tidy up.
Update your household spending plan. Less-lovingly called a ‘budget,’ now is the time to look at how much money is flowing in and out of your household. Does your spending plan reflect your current income and expenses? Are there outdated amounts or line items you can remove? With today’s inflation rate, it’s more than likely that your cost of living has creeped up since you last made your budget, and a few hundred dollars here and there can add up quickly — causing you to dip into savings more often than you’d like.
Re-evaluate your subscriptions and automatic payments. Set-it and forget-it can be a wonderful thing for convenience. Unfortunately, it can be a negative thing for controlling expenses. At least once a year, you should audit what you have on auto-draft and be sure that those free trials of apps didn’t translate into pesky withdrawals from your bank account each month. Make a list (with your spouse, if applicable) of everything you subscribe to and confirm there’s no duplication or unused services deducting from your discretionary resources.
Watch your withholdings. The amount withheld from your paycheck for taxes doesn’t just impact your take-home pay each month. It also affects what you’ll owe or receive come April 15th. Take a look at your recent pay stubs and confirm with your financial advisor or tax professional that the appropriate amount is being withheld. If it’s not, now is the time to make a change so you can start to course-correct before December 31st.
Check in on your insurance coverage. Insurance policies are an important part of a financial plan because they protect your cash flow from major expenses when unexpected situations occur. You should have coverage for risks that would involve significant future costs, such as long-term care and life insurance. However, it’s also important to have adequate coverage for more immediate risks, like auto and homeowners’ insurance. When was the last time you reviewed your property and casualty policies with your insurance agent? People often don’t know what type of coverage they have, and this can leave you vulnerable to life’s unanticipated expenses.
The financial calendar breaks into four common themes for most of my clients:
First quarter – Planning for the year to come.
Second quarter – Dealing with taxes.
Third quarter – Getting things in order and making important adjustments.
Fourth quarter – Obtaining a tax projection to prepare for the following year.
So, before we close the books on September, take the time to do your third quarter clean up. Your fourth and first quarter selves will thank you.
Neither asset allocation nor diversification assure or guarantee better performance and cannot eliminate the risk of investment losses.
Blog by Aaron Waters, Wealth Advisor
Category: Financial Service Team
