Is it Time to Spring Clean Your Financial Plan?

Written by Baylee Bryant, CFP, Wealth Manager

It’s that time of year again. Snow is melting, birds are singing, and we’re antsy to get moving and enjoy the sunshine that comes with longer, warmer days. But before we do, many of us are in a flurry to wash our windows and clean out our cupboards from everything that’s built up over the winter. After all – no one wants to enjoy summer vacation with a list of “to-do’s” hanging over their head!

The same applies to our personal finances. Spring is often the time of year when people begin to consider moving into a new home, changing their career, and starting a new educational or business venture. And with tax season just around the corner, it’s the perfect time to comb over the finer details of your financial plan and make tweaks where necessary.

Here are 5 things you can do now to make sure your financial plan is on track for the new season.

1. Make sure the right amount of taxes are being withheld from your paycheck.

This may seem like a no-brainer, but according to CBS, the average federal tax refund in 2022 was $3300.  Whew! That’s a pretty good chunk of change to be lending to the government at a 0% interest rate for the year. The general rule is to receive less than $1,000 in your federal refund each year, so if you’re receiving cash back to the tune of thousands of dollars, it might be time to work with your payroll provider to make some adjustments.

Of course, the opposite may be true as well. If you find yourself owing more than a few hundred dollars at tax time, you can work with your payroll provider to pay a little more throughout the year.

2. Carefully consider your retirement account options.

You have until April 15th (or – if the 15th falls on a weekend – the following business day) each year to make or correct any prior-year contributions to your IRAs. That means that if you’re eligible to contribute to an IRA but haven’t for 2022, you have until April 17th this year to make up that contribution. For instance, maybe you struggled with building savings in 2022 but received a windfall in January of 2023. You can then contribute up to the maximum as a contribution for 2022. Once that deadline has passed, though, that’s another year of not taking full advantage of tax-qualified accounts.

There’s a reason that these accounts have strict rules for contributions and withdrawals – because they’re powerful! The amount you can contribute to an IRA each year may seem negligible: $6500 in 2023, with a catch up provision of $1,000 for those who are 50 and older. But that amount – which might seem small to some – has tax benefits that will compound all the way until retirement. It is worthwhile to check in with your financial advisor to see which accounts you might be able to take advantage of.

3. Refresh your budget.

With so much change in spring and summer, now is the perfect time to refresh your budget. Maybe you’ve gotten a raise in the last year or experienced a big life change, like going back to school or welcoming a new addition to the family.

When most people think of budgets, they think of pages and pages of Excel sheets and expenses logged to the last cent. That attention to detail might work for some of us, but if it doesn’t appeal to you, you’re not alone! There are a handful of different strategies to budget, including the Envelope Method, the 50/30/20 Budget, and the Spending Ceiling Budget.

Merit also offers a Financial Planning Portal where clients can link any of their outside accounts to be viewed in one place. This tool can help track your spending for you and provide you with nifty graphs and projections to give you more insight into your spending and saving habits.

Just like a new workout regimen, the best budget for you is the one you can stick to.

4. Automate your savings.

If you find yourself struggling to save each year and vowing to save more with every New Year’s resolution, then try automating your savings. This is not new advice; experts have recommended automating savings for decades. But it’s stood the test of time because it works.

Nobel Prize winning economist Richard Thaler once said, “First, never underestimate the power of inertia. Second, that power can be harnessed.” Thaler is famous for making good decisions easy ones. Setting up automatic transfers to your savings or investment account is a 1-time decision that will help make a recurring decision easy. Instead of reminding yourself to save a certain amount of money each payday, you have the option to set it and forget it. Automating your savings is, in essence, “paying yourself first”.

5. Check in with your financial advisor about your long-term financial plan.

Your financial advisor is there to help and may have some insight into any changes you can implement to make sure your plan is as effective as possible. While they should be checking in with you on a regular basis, there’s nothing wrong with reaching out when a specific question comes to mind! Life happens, and we want to be there to help you navigate it. Contact Merit Financial Advisors today for your complimentary consultation.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Merit Financial Group, LLC, an SEC-registered investment adviser. Merit Financial Group, LLC and Merit Financial Advisors are separate entities from LPL Financial.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized legal advice. Merit Financial Advisors and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specifics