Back to School

Remember back in your school age days when, after a long, hot summer you were nearing the day when you had to return to school?  If you are like me, you’ll remember that a part of you had no interest in giving up your favorite leisure activities while another part of you couldn’t wait to get back to see all your friends and yes – even to get back to class and learn something.  Part of the experience included a new pair of shoes, jeans, etc. and maybe a new lunch box (yes, those were a big deal “back in the day”) or backpack as well as new pens, notebooks, calculator, etc.

Let me encourage you to tap into the excitement you felt back then and apply it to a “back to school” review of your finances.  If it helps, go buy yourself a new notebook to map out your financial plan!

Here are a few things to review:

  1. Savings Rate.  Are you contributing to a retirement account at work where there is a match?  If you aren’t, contact your HR person or department and get it set up.  If you aren’t taking advantage of a retirement plan match, you are literally turning down free money.  If you are participating in your company’s plan, consider increasing how much you contribute.  Think about increasing your contribution 1% or 2%.  I usually tell my clients that a contribution rate of 10% should be your goal.  Many advisors advocate for 15% or more.  It’s hard for most people to go to that level in one shot, but you can get there by gradual increases.
  2. Review Your Tax Withholding.  Do you have to pay a lot of income tax at year end?  Or do you get a large refund?  If you do have to pay a lot of tax, you might consider changing your tax withholding.  You can have more withheld by decreasing the number of dependents you list on your withholding and/or you can have an additional dollar amount withheld.  If on the other hand you get a large refund, you may want to consider having less withheld and add it to your savings – either via your retirement savings or into an emergency or other savings account.
  3. Check Your Debt.  Did your debt balances increase since you last checked them, or having they come down or gone away?  If they have gone up or haven’t changed, you may need to focus on reducing your debt.  This is especially true if you don’t have that many years to go before retirement.
  4. Review Your Expenses.  Are you paying for things like TV, gym memberships, etc. that you aren’t using?  If so, take the time now to cut them off.  You can use this money to reduce debt or increase savings.  My wife and I “cut the cable” a few years ago and reduced our cable bill dramatically.  We have subscribed to a streaming TV service for the college football season for the last couple of years, then cancelled it at the end of the season.  There are many ways to monitor these types of expenses and save money on them.
  5. Save up for known expenses.  Is your child getting braces?  Are you going to need a new car soon?  Any expenses that you know are coming are things that you should try to save ahead to reduce having to use debt. 
  6. Consider rebalancing your investments.  Your investments can become skewed over time and become much more aggressive than you think.  It’s worth a conversation with your advisor to see where you are versus where you started out in terms of your mix of stocks and bonds, etc.

As always, we would be happy to help with any of these items.  Feel free to reach out to us at 715-833-1884 or you can email me at gedwards@cfnmail.com