Spring is finally here! Time to throw open the windows, and let some sun and fresh air back into your house — and your finances.
Yes, we recommend working with a fiduciary advisor who will be thinking about your financial situation consistently throughout the year. But why not let spring time be a catalyst for a personal spring clean for your financial house just as much as for your cluttered garage and closet? Here are some tips we at Keen Wealth Advisors encourage our clients to consider:
1. Analyze your spending.
This is not necessarily a budgeting issue as much as an awareness issue. We believe it is important to know where your resources are going, and this applies to families with all levels of wealth – and not just those that are following a strict budget. Just imagine if the many professional athletes and entertainers who made millions only to end up broke would have taken this advice. Review your credit card statements from last year and break down your spending with a spreadsheet, highlighters, whatever is convenient. Compare your necessary spending (utility bills, tuition payments, grocery bills, car insurance, etc.) with purchases that maybe weren’t so necessary (meals out, new electronics, etc.). You might uncover some spending habits you didn’t realize you had that you can clean up. We like to say what you spend your money on tends to reflect your values. Does your credit card statement or checkbook reflect what you truly value?
2. Analyze your savings.
If you’re not retired yet, are you saving as much as you’d like? If you’re working and haven’t done so already, channeling an automatic deduction from your paycheck into savings and retirement accounts helps you clean that up and save no matter what. The old saying “out of sight out of mind” rings true here for sure. Having your investment dollars taken out and invested automatically, essentially before you see it, is one of the most powerful strategies available. Many will admit that whatever hits the checking account each month gets spent. This applies to all income and wealth levels. Can you relate? If you’re already retired, do you feel good about your level of retirement savings and the amount you are having to withdraw each year from those accounts to live? If not, let’s take a closer look at your spending patterns to see if you are on track to not run out of money.
3. Analyze your debt.
You may be making regular payments on debt like your mortgage and car. But if you have any other debt sitting around accumulating interest — like a credit card you’re only making minimum payments on — think about taking bigger chunks out of that debt until it’s gone. Getting rid of debt can be an addictive feeling, in a good way — once you get rid of one debt, you’ll feel motivated to move onto the next one.
4. Clean up your spending plan.
Now that you have an updated picture on your spending, your savings, and your debt, it’s time to funnel that info into a new monthly spending plan. As I have mentioned in prior blogs and podcasts, we call it a spending plan as opposed to a budget. A “spending plan” is a proactive plan that is intentional and freeing where the term “budget” feels like a reactive and restrictive process. We help our clients to make plans that are energizing, realistic and sustainable. Sticking to that plan will keep your debt down and your savings up. Getting used to a spending plan is an especially good idea if you’re nearing retirement age. Once you stop collecting a paycheck, your investments will be doing a good portion of the heavy lifting in your household. You’ll need to plan wisely to live off those investments and the income they generate for you. If you are spending too much of your assets and are compromising your future, do you want an advisor that will tell you the truth about that? Or one that will just tell you what you want to hear? At Keen Wealth Advisors, we will respectfully tell you the truth about your spending plan and help you to make good decisions about your current situation and long term approach.
5. Scan and shred.
Going paperless doesn’t just clean away a whole lot of clutter, it makes your important financial documents harder to lose, and easier to find. If you don’t want to buy a scanner, well, chances are you already have one: your cell phone. Take pictures of important receipts and documents, and create a file backed up in the cloud. Some online programs and services even let you scan from your phone to a PDF or Word doc, and create tags that make filing and searching even easier when it’s time to get your tax documents together.
6. Prepare for emergencies.
If you’re the head of the household with a solid financial plan in place, you probably have good insurance and your beneficiaries lined up. Take an extra step to make things easier on your loved ones by putting a folder together that explains what happens to your finances if something happens to you. Also, double-check who your beneficiaries are, and the plan for transferring your legacy. Leaving everything to “the good kid” and trusting that person’s judgement might seem like it’s the easiest option, but things can get messy in a hurry if you don’t break down your wishes in greater detail.
7. Make a calendar.
Whether you do this with a date book or use an online calendar that will send you automatic reminders, mark down days during the year for a periodic review of your insurance premiums, your credit report, your credit card spending, and so on.
One thing you should definitely put on your financial calendar — and circle with a big red marker — is an annual appointment with your financial advisor. At Keen Wealth, we recommend our clients review their plan at least once a year. We understand it may feel like a bit of work, but with the help of a solid financial team and a little effort on your own, you can enjoy the peace of mind that comes from knowing that your financial house is clean and in order.
Bill Keen is a Chartered Retirement Planning Consultant® and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.