When the weather gets warmer, it’s time to tackle those long-overdue projects. With more hours of daylight in the evening, many people take to the outdoors as yard work or exercise top their to-do lists. However, while springtime motivation is in full effect, there’s one more thing that requires annual cleaning: your finances. Financial planning is not a one-and-done task because life is always changing.
Review these five areas at least once a year so you can maximize financial resources to enjoy today and plan for tomorrow.
1. Your household budget. First, if you don’t have a household budget, start by creating one in whatever format works for you. A simple Excel spreadsheet can be used to track your monthly income and expenses. Once your budget is created, however, it will likely need revisions annually to account for salary raises, bonuses or new expenses. Significant life changes like getting married or having a baby will drastically impact your budget and should prompt a review even sooner. Even if your circumstances haven’t changed, tax laws or other things outside of your control could have. So, you might need to adjust your withholdings to avoid an unexpected expense when tax returns are filed.
2. Your savings contributions. We typically recommend clients save 20 percent of their income but 10 percent at a minimum. Take a look at the various places you save, including contributions to your IRA, bank savings accounts, etc., and combine those monthly inputs to calculate your total savings. As you do this, you might uncover old accounts that can be closed or consolidated for more efficient financial management.
3. Your automatic renewals and withdrawals. Putting bills and memberships on auto-pay is a great convenience, but not having to deal with them monthly has its downsides. When expenses are automatically withdrawn from your account, it’s easy to lose touch with how much things cost. For each expense on auto-withdrawal, review a 12-month history of what you’ve spent, calculate the average per month and ensure it matches what you’ve budgeted. Similarly, I recommend an annual audit of memberships that auto-renew. Do you really need all those streaming services? Are you using that gym membership or simply allowing this “donation” to be drafted from your account each month? Unfortunately, out-of-sight, out-of-mind expenses can eat into your discretionary income quickly.
4. Your insurance policies. With the exception of life insurance, you should have insurance policies re-quoted annually. This allows you to ensure you have adequate (but not too much) coverage and can secure discounts when available. Auto, home and umbrella insurance policies have flexible rates, and even a slightly lower monthly cost can provide some welcome cushion in your household budget.
5. Your beneficiaries and guardians. Although updates to your beneficiaries and guardians are unlikely every year, it’s wise to at least review them annually to confirm they reflect your wishes today. You’d be surprised how many people still list their parents as beneficiaries because they simply forgot to make updates when they got married or how many people still list an ex-spouse after a divorce. Put this item on your post-baby to-do list, too, or any time your marital status changes. It’s critical that legal guardians for your children and beneficiaries of your will, trust, retirement accounts or life insurance policies always be up-to-date. You simply never know what could happen tomorrow, and you want loved ones to be well cared for.
Annual spring cleaning of your finances opens important discussions with your family about the upcoming year. Are there home renovations you want to make, required vehicle maintenance or fun trips on the horizon? When you don’t plan for these one-time, special expenses, your savings can dwindle quickly to make them happen. So, come out of that winter hibernation, and get your financial affairs in order while the sun’s still shining.
Aaron Waters is a wealth advisor for Wymer Brownlee Wealth Strategies. He joined the company’s Enid office in 2010 and now operates from its location at Portland and Memorial in Oklahoma City. Aaron obtained a Bachelor of Business Administration in financial management from Abilene Christian University. He loves golf, fishing, music and travel – but nothing more than his wife, Natalie, and daughter, Ella Kate.
Aaron Waters, Registered Representative. Securities offered through HD Vest Investment Services®, Member FINRA/SIPC. Advisory services offered through HD Vest Advisory Services® Insurance services offered through HD Vest Insurance Agency, LLC. 6333 N. State Highway 161, Fourth Floor, Irving, TX 75038, 972-870-6000. Wymer Brownlee Wealth Strategies is not a registered broker/dealer or registered investment advisory firm.