A lot of big money events occur in the months leading up to April, Financial Literacy Month. If you are like most Americans, you stretched the limits of your budget during the holidays. With any luck, January or February brought you an annual raise or bonus payout. There’s a good chance by now you know whether you are getting a refund or owe money on your income taxes. Oh, and the new year is a quarter over already! Did you make any financial resolutions this year? How are they tracking? Hopefully you’re on target, but if not, right now is the time to refocus. We have 2 months until Memorial Day and if you don’t become the change you seek now, chances are you might just punt again until 2026…
If you are like me, this is the time I’m cramming in exercise to avoid exceeding my waistband, but it’s really the best time to make some small shifts to improve your financial fitness. Personally, I don’t love the term “financial literacy” much in the same way I don’t love the words “budget” or “diet.” They all feel like they have a bit of a negative spin…. If you’re budgeting, you’re spending too much… If you’re dieting you’ve been overeating… If you need “financial literacy”, you could be “financially illiterate”? But words will never hurt me!
So, what small shifts can we make now so that we say, “Hey! I’m in a better financial place!” by the end of the year?
1. Force yourself to save a bit more – If you received a raise of 2% or more, increase your 401(k) or 403(b) savings rate by 1%. Then set an annually recurring calendar entry on your phone to increase 1% every year until you are maxing out your contributions. If you aren’t sure whether you should be saving into a Traditional or Roth IRA, ask a financial planner or your tax preparer for guidance.
2. Review all your investment accounts – We are seeing some economic changes in the US that can warrant adjustments to our client’s investments. What was working for the last few years may not be as successful for the next few years. If you haven’t rebalanced1 to your target allocation in a while, it’s probably a good time to check in on that.
3. Meet with your tax professional – Yes, you need to see them in the first quarter to file your taxes, but they are too busy to really stop and offer broad tax guidance while filing hundreds of tax returns. If your tax preparer doesn’t see the need to meet at least once during the remainder of year, then you might want to find a new one. If your financial planning team has a CFP® Professional, scheduling a tax meeting with them would be smart, too.
4. Do something with your cash – If you aren’t getting at least 4.00% annual percentage yield (APY) on most of your cash at your bank or investment firm, you’re missing out on essentially free money. I see millionaires regularly who make this mistake. 10 grand getting 4% can cover the cost of attending a baseball game or two, or a great barbecue day at the beach this summer.
5. Pay off your credit cards – Too frequently I see people carrying balances when they have the savings or investments to just pay down the debt. Credit card interest rates can be crushing to any other smart financial decisions you’re making. Yes, it feels good to have cash in the bank, but in time you will have more cash in the bank by not wasting it on making banks rich.
If you made it this far and checked all the boxes, terrific!
I have one more challenge for you. Money is important, but only in the fact we save it so we can do the things we want with ourselves or our families. Have a chat with the people who matter most to you and ask them what one of their childhood dreams was that seems so outrageous now. Is it still important? How would you feel if you achieved it? Pretty good, right? Now, put a dollar amount on it that would get you to one of your pipe dreams and plan out how to make it happen. If you’re not sure how to make it happen, ask us. Its what we do every day for our clients. Happy April!
Important Disclosures
1Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. (28-LPL) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing includes risks, including fluctuating prices and loss of principal. No strategy ensures success or protects against loss.
This commentary reflects the personal opinions, viewpoints, and analyses of the Moneco Advisors employees providing such comments and should not be regarded as a description of advisory services by Moneco Advisors or performance returns of any Moneco Advisors client. The views reflected in the commentary are subject to change at any time without notice.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.