Spring is here! Or if you’re in a city like Pittsburgh, where I am, you may also have some Winter and Summer sprinkled in throughout the week as well. Anyway, it’s likely you’ve begun tackling spring cleaning tasks, such as organizing the closets, washing the windows, and detailing your car, among other “enjoyable” household chores.
It’s also the perfect time to give your finances a thorough review and refresh as well. As the seasons change, taking the time to revisit and reassess your financial goals, opportunities, and strategies can give you confidence in your financial future.
Below are 10 things you can do now as part of your financial “spring cleaning” to ensure your financial plan is on track for the new season.
1. Reevaluate Your Financial Goals
The journey to financial wellness begins with clear, measurable goals. Whether you’re planning for retirement, setting money aside for your kids’ (or grandkids’) college fund, or earmarking savings for a trip to Greece next summer (or maybe that’s just my plan?), taking a moment to reassess your goals can help you determine if you’re heading in the right direction.
Given life’s unpredictabilities, your financial goals may be constantly changing. For example, let’s say you recently welcomed your first grandchild into the world and you’ve decided against your European vacation this summer. Suppose last year you started saving a specific amount each month for this trip. Now that you have more time to save for the big vacation, you’ll want to reevaluate how much you’re putting away each month. If you’re thinking of taking that trip next summer instead, you can adjust your monthly savings to match your new timeline.
This is just one of many possibilities in reassessing your financial goals. Reflect on your financial achievements and obstacles over the past years, and adjust your goals accordingly.
Take advantage of the Notes section in the NewRetirement Planner. You can list your goals for the current year and future years as a reminder so you can reevaluate on an ongoing basis as part of your annual “spring cleaning”.
- You can find this section by heading to My Plan > Profile and Goals > Notes.
2. Ensure Your Spending Plan Is On Track
Notice I didn’t say the “B” word? Budgeting isn’t typically one of the more exciting items on the financial to-do list. Whatever you want to call it, a spending plan is the blueprint for your financial success.
Given your expenses are such a key driver of your financial plan, you’ll want to ensure your spending projections are in line with what you are actually spending from month to month. If you are spending $1,000/month more than what you had in mind, your retirement plan’s chance of success can be significantly impacted. Spring cleaning your spending plan involves reviewing your past expenses, identifying any wasteful spending, and reallocating resources to better serve your financial goals.
The NewRetirement Planner enables you to model your expenses through the Basic Budgeter. Take a look at how you’re spending your money today, and consider how it might change down the road by thinking through the different things you’ll spend money on as you go through the different phases of your life.
For instance, perhaps you’re considering retirement next year and after revisiting your expenses, you may realize that you will want to increase your travel budget in those early retirement years. Without the restriction of 12 PTO days, you’ll finally have the freedom to go on those dream vacations you’ve always imagined! Incorporating these various spending phases can be extremely valuable by creating a more accurate retirement projection going forward.
PlannerPlus subscribers can also take advantage of the Detailed Budgeter with additional features including:
- Planning for essential and discretionary expenses (Must Spend vs. Like to Spend)
- Adding tax treatment to specific expenses
- Varying your spending in 75+ categories
3. Replenish Your Emergency Fund
An emergency fund is your financial safety net.
Some key aspects of an emergency fund are:
- It’s available for dealing with unanticipated expenses or events such as a job loss or large medical bill
- The funds should be easily accessible, like cash in an online high-yield savings account or money market fund
- Ideally, it should cover 3-6 months of your total living expenses (and if having more than that means you’ll sleep better at night, that’s absolutely okay too!)
If you’ve dipped into yours recently for whatever reason, now is a good time to replenish it. If you’re starting from scratch, set a monthly savings goal to build it up gradually.
NOTE: You can earmark your emergency fund in the NewRetirement Planner as an account you don’t want to use as part of your withdrawal strategy in retirement. This can be done under My Plan > Accounts and Assets. If you have a specific savings account for emergencies only, you can hit the Pencil Edit icon and select ‘Yes’ for ‘Exclude this account from your withdrawal strategies?’
4. Check Your Credit Report
Your credit report provides you with a snapshot of your financial history, and it plays an essential role in your financial future, impacting your ability to secure loans, the interest rates you receive, and even your job prospects in some cases. Given spring is prime tax season time (more on this soon!), suspicious activity on your credit report is something you may want to look out for as well, as this period often witnesses an increase in identity theft incidents.
How to Access Your Credit Report
You are entitled to one free credit report annually from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion.
Along with this, the three bureaus have permanently extended a program that lets you check your credit report from each one a week for free. You can do so here.
Steps to Take After Reviewing Your Report
Once you review your credit report, you may want to take action on certain items, such as:
- Dispute errors: Noticed something off in your report? Is there an unknown name on one of your accounts? Don’t hesitate to challenge these errors with the credit bureau.
- Address negative items: Any large dings on your report? Come up with a plan to take care of all outstanding bills or arrange a payment plan.
- Monitor your credit score: Although the credit report tells the story of your financial history, it won’t include your credit score. Your credit score is a numerical snapshot of your creditworthiness. Today, many credit card companies and banks often offer ways to monitor your credit score at no extra charge.
5. Assess Your Asset Allocation and Rebalance if Needed
By the time spring rolls around, you may finally feel settled into the New Year, as the first quarter tends to fly by. This can be a great time to review your investment portfolio’s asset allocation to ensure it aligns with your financial goals and risk tolerance.
Asset allocation is the process of deciding how to divide your money amongst different types of assets, like stocks, bonds, and cash. The objective in building an asset allocation model is to determine what investment categories will be used and the appropriate percentages for each asset class.
Over time, market fluctuations can skew your intended initial allocation of your mix of stocks and bonds. Rebalancing your portfolio allows you to realign your portfolio with the initial asset allocation you determined as suitable for you. This could be a spring cleaning financial task you establish every year. For example, let’s say you decided initially to have a 70% stock and 30% bond portfolio asset allocation. Time has passed, and now in April 2024, your portfolio is 80% stock and 20% bonds. You would sell 10% of your stock portfolio and buy 10% of your bond portfolio.
When you’re making your rate of return assumptions in the NewRetirement Planner, you should be thinking about your asset allocation in each of your investment accounts. This article from NewRetirement’s Help Center further discusses how to enter an appropriate rate of return in your plan.
6. Don’t Forget To Do Your Taxes!
Along with April showers comes a looming tax deadline. You don’t necessarily receive a penalty for slacking on your household spring cleaning chores, but the IRS can hit you with penalties and interest if you miss a tax deadline.
For the 2023 tax year, most taxpayers are required to submit their individual income tax returns and pay any tax due to the IRS by April 15, 2024. If you lost track of time this year and need more time to file, you may fill out Form 4868 to request an extension from the IRS. This will give you an extra six months to file your federal taxes, with a new tax deadline of October 15.
Although an extension gives you more time to organize your documents, it does not delay the payment due date for your taxes. You are expected to estimate and pay the taxes you owe by the original deadline. Failing to do so may result in penalties from the IRS for late payment.
Be aware of the various tax penalties you may face for failing to file or pay your taxes on time.
7. Review Your Tax Withholdings
For the overachievers who did their spring cleaning at the start of the year, you may have also filed your taxes as early as possible. If you received a large refund or owed a significant amount when filing your taxes, it might be time to adjust your withholdings.
Last year, the average refund for the 2023 filing season was $3,167, according to the IRS. Anytime you receive a large refund, you’re essentially lending the government that amount of money at a 0% interest rate for the year. It’s money you could have had throughout the year to either pay off high-interest debts or put towards another short-term goal. On the flip side, if you find yourself with a surprise large tax liability, that is never fun either. So, what can you do?
Enter Form W-4. Typically, you initially fill out this IRS document when you are an employee to guide your employer on how much federal tax should be withheld from each paycheck. Completing this form accurately is essential as it prevents both overpayment, increasing your take-home pay, and underpayment, avoiding surprising tax bills or penalties.
Revising a W-4 can be intimidating, but there are helpful resources out there to assist with the process. Keeping your Form W-4 updated ensures that you’re not giving the government an interest-free loan or facing an unexpected bill at tax time.
8. Increase Your Contributions to Your 401(k)
If you are still working and haven’t yet reached the maximum contribution limit for your employer-sponsored retirement plan, such as a 401(k) or 403(b), even a small increase in your contributions can significantly impact your savings over time.
First and foremost, taking advantage of any employer match you may receive is top priority. Your next focus should be increasing those contributions as much as possible until you hit the maximum for the year.
The 2024 contribution limits are:
- $23,000 for 401ks, 403bs, 457s as well as Thrift Savings Plans
- If you are 50 or older, the catch-up contribution is an additional $7,500. So, you can save a total of $30,500!
Take advantage of the NewRetirement Planner to see for yourself how annually raising your contributions to your 401(k) or 403(b) by 1-2% can significantly improve your retirement outlook.
9. It’s Not Too Late to Contribute to an IRA for 2023
If your retirement savings budget was tight last year but you now have available cash to make a contribution, you’re still in luck.
The IRS allows contributions to an Individual Retirement Account (IRA) for the previous year up until the tax filing deadline. If you haven’t maxed out your contribution for 2023, it’s not too late! You have up until April 15, 2024 to make a contribution for the previous year.
You can contribute up to:
- $6,500 to your IRA if you’re under 50 or
- $7,500 if you’re 50 or older for tax year 2023
Learn more about the rules and income limits for contributing to an IRA or Roth IRA, and if a backdoor Roth IRA may also make sense given your financial situation.
10. Look for Ways to Decrease Your Insurance Premiums
Given that premiums are frequently set to automatically withdraw from your bank accounts, it’s possible that some time has passed since you last reviewed your insurance policies, be it auto, home, or umbrella (personal liability) coverage. Insurance is essential, but that doesn’t mean you should overpay.
As part of your spring cleaning, you may consider the following to reduce your insurance premiums:
- Shop Around: Compare rates from different insurers to find the best deal for your situation
- Negotiate: If you have a good relationship with your current insurance agent, give them a call and ask for a discount. The worst they can say is no!
- Bundle Policies: Combine your auto insurance with other insurance coverage (like home and umbrella) under one insurer to get a potential discount
- Increase Your Deductible: Opt for a higher deductible to lower your premium, but make sure you can afford the out-of-pocket costs in case of a claim
- Change Frequency of Payment: Many insurers will provide a discount if you make a single lump sum payment or pay your premiums just twice a year instead of breaking up the premium into monthly payments
Spring Clean Your Financial Plan with the NewRetirement Planner
Ultimately, every season is an ideal time to revisit your financial plan to identify any necessary adjustments that will keep you on track with your retirement goals.
Do you still want to retire at the same age? Have your expenses increased or decreased over time? Is there an anticipated windfall now that you weren’t expecting previously?
If you haven’t already, begin your journey with the NewRetirement Planner to explore these types of questions and many others, allowing you to confidently and calmly plan out your financial future.
