Spring Financial Planning and Clean-Up: March Madness Edition

As the air warms up and spring is arriving, it’s the perfect time to shake off the winter weather and give your finances a thorough cleaning. From revisiting your financial goals to tidying up your budget, here’s a consolidated guide to March financial planning and spring financial clean-up.

Spring is an excellent time to reassess your financial goals. Whether you’re saving for a vacation, planning for retirement, or aiming to pay off debt, take a moment to review your objectives. Are they still relevant and achievable? Have your priorities shifted? Adjust your goals accordingly to ensure they align with your current cash flows, timeline, and financial situation.

Spring cleaning your finances begins with a thorough evaluation of your budget. Review your income and expenses over the past few months to identify any trends or areas for improvement. Are there any unnecessary expenses you can cut back on? Can you reallocate funds to prioritize your financial goals? Adjust your budget accordingly and periodically.

March presents an excellent opportunity to review your investment portfolio. Evaluate the performance of your investments and assess whether they still align with your risk tolerance and long-term objectives from when they were set. While we don’t recommend jumping in and out of the market, it’s important to find a proper asset allocation you can stick to for the long term so you might consider rebalancing your portfolio if necessary, or having a financial professional take a second look.   Additionally, take advantage of any tax-efficient strategies, such as maximizing contributions to retirement accounts or harvesting tax losses.

Your credit report plays a crucial role in your financial health. Check out your credit score and look for any errors or discrepancies that could negatively impact your credit score and take steps to address them promptly. Monitoring your credit report regularly is an essential part of maintaining good financial health. Conversely, ensuring you make the right decisions daily to keep your credit on the right path to improvement is key.

Given the time of year and tax filing season in full swing, spring is the perfect time to declutter and organize your financial documents. Gather all your important paperwork, such as bank statements, tax documents, insurance policies, and investment statements, and create a system for storing and organizing them. Consider digitizing your documents for easy access and backup. Having your financial documents organized will make it easier to track your finances and help you during tax time. Tax season is also a great opportunity to review your whole financial plan as your documents are gathered and you may be identifying tax advantageous strategies to improve on.

Next, automating your savings is one of the most effective ways to build wealth over time. Take advantage of automatic transfers to your savings or investment accounts to ensure consistent contributions. Set specific savings goals, whether it’s an emergency fund, a down payment on a home, or a college fund for your children, and automate your contributions accordingly. By making saving a habit, you’ll steadily progress towards your financial goals without even thinking about it.

March is not only a time for spring cleaning your home but also an opportunity to refresh and revitalize your finances. By revisiting your financial goals, evaluating your budget, reviewing your investments, checking and improving your credit, organizing your financial documents, planning for taxes, and setting up automatic savings, you can set yourself up for financial success in the months and years ahead. So why wait? If you have any questions on the topics discussed in this blog or are looking for your spring financial clean up, email info@shermanwealth.com or schedule a complimentary 30-minute call here.

Why A Roth IRA and 401(K) Are Smart Retirement Vehicles For You

While saving for retirement is a great way to build your financial wealth and pile away money for the future, many individuals are unclear on the best vehicles to use when saving for retirement. Furthermore, we have been reading articles and hearing remarks from individuals, especially those of younger generations, that they do not want to tuck away money now for retirement, funds that they can’t touch for many, many years. So, for those of you who resonate with this feeling, but still want to optimize your retirement savings, let’s explore why a Roth IRA might be the right savings vehicle for you.

So, for starters, let’s explore what a Roth IRA (individual retirement account) is. For those who don’t know, a Roth IRA is a retirement vehicle that allows individuals who fall under a certain AGI limit to contribute after-tax dollars to a retirement account, meaning you pay taxes on the money upon contribution so your future withdrawals are tax free. Some benefits of a Roth IRA are that your earnings can grow tax free, there are no mandatory withdrawals, unlike a Traditional IRA, and that withdrawals can be taken out tax-free and penalty free, given you’re age 59½ or older and you have met the minimum account holding period, which is 5 years.
Another benefit of a Roth IRA that many young savers find attractive and comforting is the fact that they you can always access the money you contributed without penalty, no matter your age, unlike a traditional IRA. Of course, any gains in the account may be subject to taxes and penalties is withdrawn before age 59½, unless you qualify for an exception. So, while we don’t recommend withdrawing from your account, for those worried about totally locking up their money until retirement, a Roth IRA provides piece of mind that you do have access to those funds in case of an emergency. In fact, studies show that many young individuals don’t end up withdrawing from their accounts, but feel comfort knowing that they can. So if you get weary about your retirement savings, a Roth IRA and its flexibility might be right for you.
While there are many benefits of contributing to a Roth IRA, if you or your combined household has too high of a AGI, you may not be able to contribute. However, if you still want to take advantage of the Roth option within part of your retirement picture, see if your workplace 401(K) has a Roth component. Unlike a Roth IRA, the Roth 401(K) has no income limit and follows the same contribution limit as the traditional 401(K). If you are a small business owner or self-employed, but make too much to contribute to a Roth IRA, consider setting up a 401(K) for your business and adding a Roth component. This is a great way to take advantage of the benefits a Roth account offers, and also save for retirement. If you are looking to implement a 401(K) for your small business or the Roth component to your existing retirement plan, email us at info@shermanwealth.com and we are happy to help!
Given all the market volatility and economic uncertainty we’ve seen over the last few years, having a good grasp on your financial picture is important. While saving for retirement is a key piece of your financial plan, its only one piece of many, which is why we encourage working with an advisor on a holistic financial plan to analyze the larger scope. If you have any questions about your particular financial situation or a Roth IRA, email us at info@shermanwealth.com or schedule a complimentary intro-call here.