Michael F. Kay, Contributor
March 10, 2021
“Spring makes everything young again.” So said that famous author Anonymous. It’s definitely my favorite season; a time for rebirth, regeneration, and a renewal of energy after the cold winter. Some of my clients tell me they feel especially renewed in the spring and are ready to breathe some fresh air into their financial lives.
You’ve already taken a look at the tax consequences of your spending, investing, and saving habits, so why not make this a time to give your finances a complete spring recharge? Look at what’s working well and what isn’t. Start something new. All you really need is a pair of fresh eyes, a willing attitude and the participation of those who will feel the impact of your financial decisions.
Your essential goal is to make sure your values are aligned with your actions. So if you really care about something—like protecting your family, saving for retirement, leading a balanced life or simply living within your means—a new look can be just the thing to inject some energy into your financial life.
Here are five tips to get you started:
What is your weekly, monthly or quarterly savings target? Are you hitting it? If so, terrific! If not, what can you eliminate, alter or shave to help you pack away more cash to fund that which you value most? Look at your spending with a critical eye. Are you getting full value for the dollars you spend? Every dollar that you rescue from spending can be shifted toward your highest values.
Remember to pay yourself first. If you have a 15% savings target, then you must direct 15% of every deposit toward that goal (saving or investment). Paying yourself first puts your important goals above your spending decisions.
Some retirement plans offer automatic rebalancing. Elect this option if it’s available so as not to allow market volatility to tilt your portfolio away from a rational allocation. If you don’t have this option, then you should meet with your advisor and work to manually adjust your holdings back to your model. If you have not maximized your contributions, then make sure you are edging your contribution levels upward as often as possible. Remember, even a 1% increase should pay you back handsomely in the future.
Assessing your risk management.
We’re talking about emergency funds, insurance of all kinds and legal protection. Do you have any old life insurance policies that you’ve been paying on forever or policies that were given to you by your parents? Do you still need the coverage? Does it still make sense based on your needs?
Look at the range of protection you have from medical to liability; from disability to renters or homeowners. Do you have a deductible or co-insurance that makes sense based on your current economics? If you bought your policies when you first started out, you may have signed up for low deductibles because cash was so tight. But as your financial stability grows, those low deductibles are no longer appropriate. The premium savings can be shifted to areas you value more.
Sometimes, buying an investment can be the result of an emotional decision. This is a perfect time to review your holdings to assess whether those decisions are currently in your best interest and how they fit into your overall game plan.
History is littered with great companies that no longer exist. Consider your strategy, time horizon and how much risk you’re willing to take to achieve your goals.
Estate planning and documents.
Do you have a Will, Power of Attorney and Health Care Directive? If so, congratulations! Are these documents still relevant and current or do they need a cleanup because of changes in your life or the law? If you do not have Estate documents, then the only thing you need to clean up is to get them done.
You’re not alone if you’ve put this off. It doesn’t sound like a sexy thing to spend your money on. But the fact is, if you have children and no Will, dying means that your state will decide what happens with your children and your estate—and that’s rarely a good thing.
Spring is a great time to usher in a new season of financial growth and prosperity. Recharge, and then you can start planning a worry-free summer vacation.
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