Taxes Done? Time for a Financial Tuneup
By now you probably have your taxes done and you’ve tackled that annual duty with diligence and you’re glad you don’t have to think about them for another year. While getting your taxes done does provide a sense of accomplishment and lifts a weight from your shoulders, now isn’t the time to brush aside your finances for another year. Instead, this is a perfect time to tune up your finances to make the most of the coming year. After all, you probably know more about your financial situation today than you usually do thanks to having taxes fresh in your mind.
If you’ve filed your taxes and ended up with a large refund or had to cut Uncle Sam a check, it’s time to address your withholding. If you owed money it’s a no-brainer that you want to adjust your withholding so more money is set aside for taxes so that you don’t have a bill next April. But having a large refund can be just as bad. In fact, the average refund this year is a little over $3,000. That means most people are letting Uncle Sam hold a few thousand dollars hostage for 11 months of the year when it could probably be put to better use immediately. Think about it—a $3,000 refund works out to an extra $250 a month of added cash flow. If money is tight you can see how helpful having that money each month would be. By adjusting your W-4 you can have a little less money withheld and put more money in your pocket with every paycheck. TurboTax makes it easy to adjust Form W-4.
Check Your Investments
Now is a good time to check your investments. That’s because the past two years have been two of the best consecutive years in the history of the stock market. If you’ve been invested during this time and saw some of these rapid gains your portfolio is probably a little out of whack. You should have a target asset allocation you try to remain at, but the gains in the market could have skewed your allocation heavily toward stocks if you haven’t rebalanced in a while. If that is the case you are likely more exposed to risk than you realize, so it’s time to check your investments and rebalance your portfolio to get you back on track.
Automate Your Finances
If your finances are in pretty good order and you’re still looking for a change that can help your finances, consider automating everything. Technology is a wonderful thing and these days you can virtually put your entire finances on autopilot. From automatic bill pay to retirement contributions, these days you don’t have to think twice about things.
Start with your savings goals. If you have a 401(k) that’s obviously automatic already, but if you have an IRA or other investment account you can set it up to make regular and automatic contributions on the interval you choose. The same can be said for even a regular savings account. Why wait to make a one-time transfer from checking to savings when you can set it up so that a little bit goes into your savings account with each paycheck? Once it’s automatic you never have to think about it or worry about spending the money before it gets deposited. Finally, the most obvious choice is automating bills. The fewer checks you have to write and accounts to login to, the easier your life will be. Why spend an hour or two each week paying bills when you can pay them without thinking twice about it? Not only will you have more free time on your hands, but you may even save some money by making it automatic.