Personal Financial Plan - Second Quarter

Managing your personal finances is an ongoing process that requires commitment and discipline.  Most people are successful at making sure the bills get paid and often commit to saving on a regular basis.  However, managing your finances effectively is more than just handling the daily or monthly tasks. 

Below is a monthly calendar for April through June that can serve as a guide to addressing some of these other issues.  The suggestions on this outline may not match your personal financial timeline, but they can serve as a reminder to make sure you address these key considerations when it’s right for you.  

April: Taxes & Organization

Be sure your tax returns are filed

• You can file for an extension if you need more time to complete your return.
• Filing for an extension does not delay when you may need to pay the amount due.
• If you make quarterly estimated income tax payments, be sure to include them in your cash flow or budgeting process.
• You may want to prepare or update a schedule of some of the major items found on your last several tax returns.  This could include total income, adjusted gross income, itemized deductions, regular income tax and other taxes like AMT or the net investment income tax.  Understanding your tax situation better may help you identify where there are opportunities for saving. 

Dispose of tax information that is no longer needed

• The IRS has three years to begin an audit unless you do not report all your income or file a fraudulent return. 
• You generally only need information for three years from the due date of the return when you report the information. However, if you have a lot of deductions, special situations, or own a business, be sure to consult your tax advisor regarding what to keep and what's safe to shred.
• It is advisable to keep copies of your tax returns forever.

May: Security & Debt Management

Protect your financial identity and electronic activities

• Check your credit report to guard your financial identity.  You can get a free credit report through the website – www.annualcreditreport.com. 
• Consider changing important passwords on a regular basis and keep password information secure.
• Destroy hard drives before disposing of old computers, laptops or smart phones.
• Make sure the virus protection and firewalls on your computers are up to date.
• Back up important computer files and store those files in a secure location away from the computer’s location.  A few CDs or USB drives in your safe deposit box may come in very handy if there is a natural disaster or fire at home.
• Shred documents that contain important personal information instead of just putting them in the trash.

Review your borrowing

• The sensible use of debt can be part of any sound financial strategy.  However, too much or the wrong kinds of debt can make life miserable.
• Prioritize your borrowing to obtain things with long term value (education, home, and true necessities) rather than borrowing for things with only fleeting value (vacations, expensive jewelry, or clothes that are seldom worn).
• Be sure to understand the terms of all your loans, including due dates, payment requirements, and interest rates.
• Review the terms of your mortgage.  Refinancing may enable you to reduce your payments or pay off your mortgage sooner.
• If you are accumulating credit card debt, quit or reduce using the card and find ways to pay off expensive credit card debt. 

June: Investments & Six-Month Check-Up 

Review your investments

• Evaluate whether changes in the value of your investments have changed your actual asset allocation compared to the allocation that is appropriate for your time horizon and risk tolerance.
• If you hold stocks that you plan to keep and do not need the dividends for living expenses, consider having the dividends reinvested.  Dividend reinvestment can be an effective way to add to your positions in your long term holdings.
• Evaluate your relationship with your broker or advisor.  Talk to your broker or advisor to improve the relationship if you are not satisfied.  This includes communications as well as portfolio performance. 

Perform a mid-year checkup of your finances

• Evaluate whether you are living up to the financial resolutions you set in January.
• If you want to save more, consider an automatic savings plan.  Have your financial institution transfer a certain amount from your checking account into your savings account each month.  You can accumulate funds and may not even notice you are spending less.
• If your spending seems out of control, create a budget or household spending worksheet to identify where you are spending.  You then may be able to identify where to cut back.