Five Ways to Reprioritize Your Finances This Spring
For many, spring is the chosen time to clean out your home after winter so you can start fresh in the summer. Clearing clutter and refocusing on goals can be just as important for your finances as for your home. Explore the following considerations to spring clean your finances and set a plan for the remainder of the year.
Refocus on your goals. Assess your finances to see if you may have strayed from your financial goals. If you’re far behind the targets you’ve set, review your spending habits and try to identify which choices and activities have added to this setback. There’s still time to get back on track.
Consider refinancing. Interest rates ticked markedly higher in the years after the pandemic and have since dropped moderately, given the Federal Reserve’s recent pattern of rate reductions. If you’re carrying a higher rate on a loan, consider whether you could benefit from refinancing. Lowering your interest rate by even a quarter of a percent can potentially add up to thousands of dollars in savings over the life of a loan. Student loans and business loans are top prospects to consider. Home mortgages may also be eligible, although if you bought your property when interest rates were very low, it likely makes sense to keep your current loan.
Be strategic with your health and flexible spending accounts. If you have funds in an employer-sponsored flexible savings account (FSA), remember that the money expires at the end of the year. It may make sense to schedule health appointments soon, before the summer season is in full swing. You can use your tax-advantaged account to pay for regular medical and dental bills, eye exams, eyeglasses, chiropractic care, and mental health counseling. If you have a health savings account (HSA), the funds don’t expire. Consider using the funds for various health expenses this year, or keep the money invested for future needs, such as retirement health expenses. You have until the federal tax filing deadline (generally April 15) to make your annual contribution to the account for the prior year. Contribution limits vary based on certain factors, including whether you have single or family high-deductible health plan coverage, so check with your tax professional if there are questions.
Increase contributions. Boost your retirement accounts and reduce your taxable income by allocating the maximum amount to your tax-deferred IRA and 401(k) accounts. Your contributions will not be taxed in the current year. Plus, when you eventually withdraw the savings in retirement, you will most likely be taxed at a lower rate.
Protect yourself. Review your insurance policies and evaluate if you have the appropriate coverage. A divorce, a child’s college graduation, a large purchase, a home remodel, etc., could cause you to need more, fewer, or different options. Look for savings from bundling policies and pursue eligible discounts.
As you reassess your financial well-being this spring, consider working with a financial advisor who can help you sort through potential challenges, identify your key goals, and develop a strategy to keep your financial plan on track.
Chris Thompson, CFP ®, CRPC ®, CMFA ®, is a Private Wealth Advisor and Managing Director with Upper Deck Wealth Management, a private wealth advisory practice of Ameriprise Financial Services, LLC, in Ponte Vedra Beach, FL. He specializes in fee-based financial planning and asset management strategies and has been in practice for 33 years. To contact him, www.ameripriseadvisors.com/team/upper-deck-wealth-management, 904-380-2290, 818 A1A N, Suite 301, Ponte Vedra, FL 32082.
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