6 Simple Ways To Refocus Your Finances This Year
Flowers are born to bloom. With every spring blossom, they open themselves up for the nutrients they need to survive. But blooming is far from simple or predictable. In order for flowers to bloom, they need the right access to light, temperature, water, and wind. Each of these elements plays a role in the lifecycle of a flower and when one goes wrong, it can be difficult for them to open up.
Like flowers, we too are born to bloom. We want to thrive in our environment and use the tools and resources we have to build a beautiful life. But there are many things that stand in our way. One element that has certainly proven itself a formidable opponent is the coronavirus pandemic.
This virus has impacted nearly every facet of our lives: from work to relationships to hobbies and more, our way of life has altered in profound ways. We have had to rely on technology for family visits, church attendance, and even jobs. In the swirl of this global health crisis came drops in the market, loss of jobs, and general uncertainty about one’s financial future.
Today isn’t about speculation, forecasts, or predictions. Instead, today is an opportunity for a breath of fresh air, a chance to focus and reflect on your finances for the rest of the year. While we may still be weathering this storm, there is a way to bring light and life to your finances this year.
Let’s get your finances to full bloom together.
1. Adapt your plan to life changes
Everyone is experiencing a change in one form or another, and it is important that your finances accurately reflect that change. If this pandemic is any indication, nothing stands still, not even your finances. Take the two new pieces of legislation introduced in 2020: The SECURE Act and the CARES Act. While each targets different groups, they are both designed to provide reform and adapt to current circumstances.
The SECURE Act implemented new stipulations designed to help retirees save more for retirement namely making it easier for employers to establish 401k plans, doing away with the age limit to contribute to IRAs, and increasing the age for RMDs to 72. While the CARES Act provided economic relief due to the pandemic, it also suspended RMDs for 2020 and allowed retirees to dip into their 401k for COVID-related expenses without penalty.
The point here is that things adapt; perhaps your income has fluctuated or you have newfound medical bills or you are caring for a loved one. The first thing to do is understand, recognize, and manage that shift and bring your finances along for the ride. Once you have a firm grasp on your situation, you’ll be better able to take productive steps in the right direction.
2. Re-work your spending and saving habits
More likely than not, your finances have been impacted in some way from the pandemic. Perhaps your part-time job has stalled or maybe your nest egg took a bigger hit than you anticipated. No matter what, you will need to start re-working your spending and savings habits to best reflect where you are now.
This might mean that you have to spend less on discretionary spending like eating out, gifts, and travel, and refocus your spending on the things that you need. When you take a good hard look, you’ll be able to find places to cut back and redirect those dollars to another source like your emergency fund or investment accounts. Take the time to really dig deep and evaluate your current spending habits.
- How have your spending habits changed?
- What adjustments can be made to your retirement spending plan that reflects those changes while still keeping you on track to reach your goals?
The other half of this equation is saving. Perhaps you had to dip into your emergency fund to cover some expenses due to the coronavirus. Don’t worry, that is what an emergency fund is for: emergencies. Now is a good time to start directing any other discretionary income to build up that emergency fund and get you back on solid footing.
You might also look at contributing more to your retirement funds like IRAs or other portfolio investments. While it might seem scary to not only remain in the market but also add funds to it, retaining your long-term financial strategy is often the best course of action.
3. Review your taxes
Our team at Step by Step views taxes as a year-round element. We are always looking for new ways to add proactive tax strategies into your financial plan. Given the current world climate, you may need to make some tax adjustments.
- Will your RMD strategy differ this year?
- How will any loss of revenue impact your Social Security strategy?
- Do you need to withdraw more from your portfolio than initially planned?
4. Concentrate on your goals
It is tough for situations to be out of your control. Many people have been experiencing this lately and it isn’t fun. But the antidote for this stress is taking action. Instead of focusing on the things that are outside of your control like the market, focus your energy on the things that you can control like your income plan, spending, saving, and your financial goals.
In times of uncertainty, you can use your financial goals as a guidepost. Take a look at both the short-term and long-term goals that you set for yourself at the beginning of this year. You might find that your short-term goals were redirected but what about your long-term ones? Here are some questions to ask yourself.
- What are your long-term financial goals?
- Have those goals shifted? If so, how?
- Is your financial plan still set up for you to reach those long-term goals? If not, what productive changes can you implement to help get you there?
5. Focus on what really matters
Difficult times give us the opportunity to center ourselves on the things that matter most: family, loved ones, community, spirituality, and more. It is important to give yourself the mental space you need to dedicate your time and energy to what matters most.
Now is a good time to give yourself (and those around you) a break. Try to find moments of grace in your life and let your goals, values, and priorities be your guide.
6. Work with a team you trust
With all of the changes happening in the world, it is crucial to work with a financial advisor you trust. You need a team that understands your unique financial situation and can build a plan around that to help you reach your goals.
Married retirees today are facing unique challenges like reassessing their charitable giving strategy, making a new plan for RMDs, understanding their investment strategy, and more. Our team specializes in navigating people through these changes and challenges. Are you ready to refocus your finances this year? Schedule a call with our team today.