As temperatures warm up, vacations get scheduled and summer approaches, physical fitness becomes a top priority for many. But what about financial fitness? Financial to-do’s are commonly put on the back burner during the summer months, but it’s actually a prime season to get finances on track and see plans through to year-end.
Below, we target some attainable goals and action plans we recommend putting in place this summer. Getting your finances in shape can pay dividends over the long term and help keep you on track for success.
Put yourself on a spending diet. First things first: Assess spending versus saving and analyze what’s coming in each month, along with what’s going out from those funds. Once you understand where each dollar goes, e.g., mortgage/rent, bills, entertainment, you can then realign spending and place a bigger emphasis on savings goals. Try to incorporate a spending diet for a set amount of time—let’s say one month to start—and you’ll be amazed at how easy it is to cut back on discretionary spending and funnel funds toward more meaningful financial goals.
Add some muscle to your retirement plan. Has it been a while since you increased your 401(k) savings rate or made a Roth IRA contribution?At a minimum, increase your 401(k) plan savings rate by at least 1 percent annually, or every time you get a raise. Consider also making a Roth IRA contribution to complement your 401(k) savings. A Roth IRA is an after-tax savings vehicle, meaning you don’t get a tax deduction for the contribution like you do for a 401(k); however, the earnings aren’t taxed in retirement, unlike a 401(k). There are earnings limits to be eligible to make a Roth IRA contribution, so check with your tax advisor first. Adding a Roth IRA to your retirement savings mix allows you more flexibility and options with managing your tax picture during retirement when needing to tap into it for living expenses. By beefing up your retirement savings as much and as early as possible, you’ll be taking advantage of the power of compounding—it will benefit you in the long run.
Tighten up your insurance and estate plans. Just like a retirement plan, insurance should be revisited at least annually, or based on life changes, e.g., marriage, birth of a child, divorce. Review your life and disability insurance to make sure they provide sufficient income replacement to your spouse and/or children in the event you become disabled or die prematurely. An estate plan also needs periodic attention, at least every few years or as life changes warrant. Make sure your plan is ironclad based on your preferences, and also have open conversations with beneficiaries to share your wishes for your finances and their role in your estate plan, e.g., estate executor, power of attorney, trustee, etc. For professionals in any stage of career, don’t think estate planning is something you should think about later in life. If you have any assets—savings, 401(k)—now’s the time to set up a strong estate plan that will provide for your loved ones.
Don’t sweat the small stuff. Financial planning can be overwhelming at times, but that’s what professionals are here for. If you haven’t already, consider working with a trusted advisor who can help you take stock of your financial life and suggest an action plan to assist in keeping you on track.By aligning with an advisor, you can take some of the pressure off yourself.
This summer, take charge of your personal finance plans. Enacting small changes today can create big changes tomorrow.
Contact Travis or your trusted BKD advisor if you have questions.
BKD Wealth Advisors, LLC is an SEC registered investment adviser offering wealth management services for affluent families and investment consulting services for institutional clients and is a wholly owned subsidiary of BKD, LLP. The views are as of the date of this publication and are subject to change. Different types of investments involve varying risks, and it should not be assumed that future performance of any investment or investment strategy or any noninvestment-related content will equal historical performance level(s), be suitable for your individual situation or prove successful. A copy of BKD Wealth Advisors' current written disclosure statement is available upon request.