As spring arrives and the flowers bloom, this is a good time to review your finances. Actually, any time is a good time to do this. You don’t need to obsess over your budget, but it’s smart to make money check-ins a regular part of your routine, by conducting a self-audit at least once a year.
A self-audit is not as daunting as it sounds. Take some time from cleaning up the yard and house this spring to also tidy up your finances and make sure you’re on track to meet your money goals.
Review Your Spending Whether you call it a budget or a spending plan, you should look in the rearview mirror over the past few months and write down your recurring bills and expenses. Make sure all your bills are up to date, of course. Look over recurring expenses and figure out if it’s time to, say, cancel or negotiate for a better rate on some subscriptions. Add “automate my bills” to your to-do list if you struggle with deadlines.
Examine the monthly and annual renewal payments made on autopay to vendors particularly to subscriptions and services to be sure they are still providing services and products you still want particularly when those payments are made automatically from your bank accounts or credit cards.
When you inventory those expenses, categorize them according to Needs, Wants, and Wishes. Needs are expenses you must meet to keep a roof over your head and food in your belly. The Wants list is self-explanatory, things you aspire to have or do, and may happen someday with some planning. The Wishes list is for stuff that would be nice to have, but you could live without.
Is there a way to eliminate or reduce your lists? For example, that $5 daily mochaccino latte or $70 cable bill might be great candidates for your first cut. You don’t need to eliminate them entirely; maybe try less expensive coffee drinks, or streaming services.
Put Your Savings on Autopilot That $50 to $100 a month you recouped by disconnecting your cable service and brewing your daily coffee at home might be redirected automatically to your emergency fund. Don’t have an emergency fund? Start one! If you don’t have an emergency fund to cover at least six months’ expenses, you could literally be one or two paychecks away from disaster.
Audit insurance policies. Too little insurance coverage leaves you open to financial devastation; but as life circumstances change you may not need as much as you previously did. Review all your coverage, including auto, homeowners (or rental), life, disability, and umbrella.
Check on all beneficiaries on life insurance policies, retirement accounts, and those named on Transfer on Death accounts to make sure these are accurate. These types of investment accounts pass to the beneficiary when the owner dies, despite what the will may state.
Many people put retirement planning on the back burner. Even small contributions to a workplace plan such as a 401(k) compound with time—especially when an employer offers to match some of what you put in. If you’ve maxed out on contributions (or even met your company match), consider opening a Roth individual retirement account (IRA). Roth IRAs let you contribute after-tax dollars—and take tax-free distributions (as long as you meet certain IRS criteria) in retirement. Having a mix of tax-deferred accounts (such as a traditional 401(k) or an IRA and after-tax accounts (such as Roth 401(k) or IRA) will give you more flexibility on how and when to take income once you retire.
Review financial and investment documents. It is easy to get into the habit of keeping every financial or investment document forever, just in case. But if your spring cleaning is to get your financial house in order, our blog post “How Long to Keep Important Financial Papers” has suggestions about retaining financial and investment documents.
https://bowenasset.com/how-long-to-keep-important-financial-papers/
Cyber-security. Well-publicized data breaches within companies and government entities have highlighted the increasing sophistication of hackers. But the threat extends well beyond these settings. Be vigilant, as cyberthreats continue to evolve and make it a priority to take extra steps to protect your personal information and financial security.By following a few guidelines, you can make your information less attractive to potential thieves. One of those guidelines is to change your passwords at a minimum, once a year. For more on this and mention of a password manager, see our report on cyber-security.
https://bowenasset.com/use-that-cookie-jar-cybersecurity-and-you/
Research charitable contributions. If you are considering making any charitable contributions, you may want to do the research now. Just as with investing in a for-profit firm’s stocks, it’s still important to ensure that the money you put into a charity will have a good return on your investment (i.e., making sure the money you give will be efficiently put to good use) so your donated resources are not squandered. Check out our Bowen Reports on charitable giving. https://bowenasset.com/category/charitable-giving/
Cash gifts and taxes. If you can afford to be generous, in 2023 you can give up to $17,000 each to any number of individuals with no gift tax or reporting requirements. Also, there is no tax for the recipient. Unused portions can’t be carried over to the next year. Individuals can make unlimited gifts on behalf of others by paying their tuition costs directlyto the school or their medical expenses directly to the health care provider.
In an emergency or the event of incapacity, could those who need to know—adult children, caretakers, or others given power of attorney—quickly find the documents and information such as bank account numbers, house deeds, wills, and tax returns that they need to continue taking care of business?
https://bowenasset.com/when-life-goes-sideways-be-prepared-to-help-your-helpers/
Finally, remember that bad financial habits come from neglect and passive spending decisions. With everything the new season brings, spring is the ideal time to get back in the driver’s seat and reacquire the big picture. Clear out the clutter and do away with what is not working for you to make space for new ideas, goals, and dreams.
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As always, if you have any questions about this report or any other questions, please reach out to Bowen Asset at info@bowenasset.com or (610) 793-1001.
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