Spring is officially here and now is the perfect time to discuss some smart financial moves you should consider as part of your spring cleaning this year. After all, we spend hours sprucing up and cleaning our homes to usher in the warmer weather, and our finances deserve the same care and attention.
Spring Clean Your Finances in 5 Easy Steps
Let’s make sure your financial foundation is strong enough to weather any storm.
Review Your Goals and Investments
It’s been three months since you set your goals (hopefully) and now is a good time to review your progress and make any necessary course corrections. Goals need to be something you genuinely want and are motivated to achieve, but they are not etched in stone. In our enthusiasm on January 1, we occasionally set too many goals or the wrong ones. This is your opportunity to refine them. Once you’ve recommitted to your goals, determine the actions steps you need to take in the next three months.
Now let’s take a look at your investments and see how they are performing. Are you still are track? Additionally, your asset allocation may have shifted overtime due to the overall stock market performance and may no longer be in alignment with your risk tolerance and/or timeframe. Rebalance, as needed.
Success Tip: Avoid emotional changes or knee-jerk reactions. You are looking at your investments at a moment in time. It may be on a good day or bad day. What matters is whether you are still on target to achieve your goals.
Review Your Tax Returns
By now many of you have already filed your taxes or will be doing so imminently. Before you forget about them until next year, take a few minutes to review your 2013 return. Did you get a refund or write a check to Uncle Sam? I know many people look forward to a large refund, even though you are giving Uncle Sam an interest-free loan. However, it is your personal preference.
Instead, I want to focus on those who had to cut a check, specifically those of you who are self-employed (full or part-time). You may want to sit down with your accountant after tax season to better understand ways you can lower your tax burden, including.
- Discussing what investments you plan to make in the business, adding staff, new equipment and/or advertising/marketing costs.
- Seeing if changing how you designate your business can lower your tax liability.
- How increasing your contributions to your self-employed retirement plans (SEPs, Solo-401ks) can lower your taxable income.
Please note: Taxes are complicated and the rules change frequently. Make sure you seek guidance from a CPA or tax advisor regarding your individual situation.
Got Kids? Then Start Thinking about College
Most parents want to send their kids to college and would like to help pay for at least part of their education. College is definitely an investment and like all investments, the earlier you start saving, the more time your money has to grow. Keep in mind, however, that your child will have the ability to apply for student loans. A luxury you don’t have when it comes to your retirement. So as hard as it may be, make sure you have your financial future shored up before you pay for your children’s college.
When your child enters high school, be very clear with them how much you can help out and any expectations that come with your financial assistance, i.e. in-state public college versus out-of-state private college, etc. Too many times kids automatically assume their parents will foot the bill or they will have to take out big loans. They neglect to apply for scholarships and always accept the maximum amount of aid offered, whether or not they need it all. For more guidance, please check out my College Survival Series.
Review Your Monthly Bills and Negotiate Lower Rates
Many of us set-up automatic bill pay, which is great for helping us avoid any late fees. The downside is many people don’t pay much attention to their bills. We just pay them without noticing rate increases or assessing whether we truly need the service any longer. Now is a good time to review bills and request a lower rate or look for a more affordable rate and eliminate services and subscriptions we don’t need.
Clean Out Your House and Earn Some Extra Money
As you do your spring cleaning, don’t just toss things in the garbage. Many things can be donated or sold on Craigslist, e-Bay or at a garage sale. This can also be a great money earning opportunity for your kids. Once kids realize they can earn cold, hard cash for their old toys and clothes, they will eagerly clean their rooms and playrooms, looking for things to sell. Let them use their earnings towards their save, spend and share goals. If you do have a garage sale, considering having them sell bottled water, soda and/or some sort of baked goods, like cupcakes or cookies. Little kids are pretty irresistible.
How do you spring clean your finances?
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