Winter has just about passed, and we’re happy to welcome Spring back with open arms! If you’re like most people, the hustle and bustle of the holiday season was soon followed by tax preparation (which tends to take up the whole first quarter of the year).

Now that the holidays and tax season are over (whew!), what should you focus on for the rest of the year? We recommend starting with spring cleaning to organize and reset your financial life for the months ahead. Here are a few best practices for getting started.

Check-in With Your Budget

First, let’s try to get a handle on your budget. This starts with a look back over your spending and saving habits in 2023. Pulling up old credit cards or bank statements can be a little painful or uncomfortable, but you need a realistic understanding of how you did last year to best prepare for the year ahead.

Look for any noticeable habits or areas where you tended to spend more than you budgeted (such as entertainment or eating out). Did you have a habit of spending more the weeks you got paid? Or do you splurge during a particular time of year (like summer or holidays)?

Use this information to understand your financial habits better and determine if changes need to be made. Or, maybe you’re pleased with how well you stuck to your budget last year. Either way now’s the time to update your budget based on this year’s numbers (including income and expected expenses). Be sure to incorporate or update your savings goals as well, such as building an emergency fund, contributing to your health savings account (HSA), and/or your retirement accounts (401(k), IRA, etc.). If your income has grown since last year, ensure you increase your contributions accordingly. 

If you’d like more real-time accountability and analysis of your spending and saving habits, you may want to consider using a budgeting app that tracks your spending.

Take Control of Your Debt

Speaking of budgeting, you’ll want to incorporate debt repayment and management strategies into your yearly budget. While you should always pay at least the minimum amount on all loans or lines of credit, focus any extra income on paying down the highest-interest debt first (usually, this includes credit cards and personal loans).

Called the avalanche method, this debt repayment strategy tackles debt in order of interest rate. Once you get the first loan paid off, you redirect the money you were putting toward that loan to the next one with the highest interest—and so on.  

Check Your Credit Reports

You may also want to revisit whether you still hold the best credit cards for your circumstances. Do the interest rates, incentives, protections, and other perks still reflect your needs? Ditto on that for your home loan. Rates are expected to drop throughout 2024 and beyond, so it may soon be time to consider refinancing your mortgage or opening up a new line of credit.

Before applying, however, check in on your credit report. The higher your credit score, the more opportunities and better terms you’ll be offered. You can periodically receive a free full credit report from the three reporting agencies (Equifax, TransUnion, and Experian).

If you’re not satisfied with your current credit score, there are a few things you can do to raise it over time, including:

  • Pay all bills on time
  • Keep your usage to available credit ratio low
  • Open a new credit card or ask for higher credit limits on current cards
  • Check for mistakes on the credit report

Review Insurance Coverage

Most adults have at least home and auto insurance, and many also have a life insurance policy. Depending on your circumstances and line of work, you might also have short- or long-term disability or umbrella coverage.

While it’s great that insurance covers your significant areas of concern, when did you last check your policies? If it’s been a while, it’s possible that your circumstances have changed, and your old coverage no longer suits your needs. Perhaps you’ve grown your assets significantly or added a new family member. Over time, it’s easy to end up with gaps — or even overlaps — which can lead to too much or too little coverage.

If you’ve not performed an insurance “audit” recently, there’s no better time to cross this off your list.

Ensure Your Estate Plans Are Current

Nobody likes thinking about death, but unfortunately, your estate planning documents will need to be revisited from time to time — especially as your family grows and evolves. If the last time you updated your will was when your child was born… but now they’re out of the house and starting a family of their own, then it’s time to update your estate plan.

Over the years, you may have acquired or sold business interests, added new assets, or let go of old ones. Your original intentions may have changed, or government regulations may have changed them for you. For all these reasons and more, it’s worth revisiting your estate plans annually.

Look at Your Healthcare Directives

As healthcare becomes increasingly complex, advance directives (aka living wills) play an increasingly vital role in your financial life.

An advance directive can ensure your healthcare wishes are met if you’re incapacitated or unable to communicate them when needed. This is an important document, as it can help your loved ones understand your wishes and act on your behalf to the best of their ability. 

If you don’t already have a living will, Aging with Dignity’s Five Wishes is an excellent resource for learning more.

Legal Paperwork for Adult Children

We all know that “adult” in the legal sense doesn’t always translate to reality. Your young adult children (primarily those in their late teens or early twenties) likely still depend on you for help. But did you know that if you don’t have the legal paperwork in place, healthcare providers and others may be unable to respond to your requests or even discuss your adult child’s personal information with you?

If your child wants you to have access to their healthcare information or make decisions on their behalf in case of an emergency, you’ll need to establish a healthcare power of attorney or durable power of attorney and gain HIPAA authorization.

Get Ahead of Tax Time

Provisions outlined in the Tax Cuts and Jobs Act are set to sunset after 2025, including those extra high standard deductions and federate estate and gift tax exemption limits. Now’s a great time to get ahead of the 2025 tax season by identifying ways to reduce your taxable income, ideally while achieving your other goals (like charitable giving and retirement).

A Donor Advised Fund, for example, can help increase your tax-deductible contributions (especially if you plan on itemizing your deductions next year).

Prioritize Your Retirement Savings

As we mentioned earlier, you should incorporate retirement plan contributions into your annual budget—especially tax-deductible contributions. If your employer matches contributions, maxing out those matching contributions will help amplify your saving power.

Another vital tool for increasing your savings is taking advantage of catch-up contributions. These are available to individuals 50 and older and allow additional contributions above and beyond the usual IRS limits. 2024, for example, individuals over 50 can contribute $30,500 to their 401(k), which is $7,500 more than the normal annual contribution limit.1  

Review Your Investment Portfolio

Again, take some time to review your investment strategy—especially if it’s been a while since you established one. Work with an advisor to determine if your portfolio still reflects your goals and risk tolerance or if adjustments need to be made. If you experienced substantial growth in previous years, can you lock in some gains by rebalancing your portfolio to its original mix?

While we view investment management as a long-term marathon (as opposed to a sprint), it still requires ongoing monitoring and occasional adjusting. Now’s a great time to check in with your progress, review your goals, and perhaps set new ones that align with your current stage of life.

What Should Your Next Steps Be?

Decide which of these best practices should be your top priority and start working through them at a steady pace that works for you.

You may use a second opinion or ongoing professional guidance as you forge ahead. We’re here to help you conquer your spring cleaning financial checklist by providing personalized consultations and custom financial guidance.

Feel free to schedule time to talk with us today about your objections, goals, and hopes for 2024 and beyond.

Sources:

1401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000

After a successful career in high-tech, Sheila McGinn, CFP® followed her passion and became a fee-only Financial Planner, where she helps clients navigate complex financial decisions and reach their financial goals.

Disclaimer: This content is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. For advice specific to your situation, consult a financial planner, accountant, and/or legal counsel. Reproduction of this material is prohibited without written permission from Brightview Financial Solutions, LLC, and all rights are reserved.