R&R Insurance Blog

For those of us in the Midwest, there is an uncomfortable reality that sets in about this time every year. Summer is reaching its waning days, and though Autumn is a favorite season for many of us we know all too well that Old Man Winter will not be far behind. But from a personal financial planning standpoint, this time of year does possess tremendous opportunity to make certain that we have not only done all of the things that we were supposed to do during the year, but that we were also intelligent in the manner that we did so.

With more than half of the year gone, we now can reflect on the things that we have done, and whether they have helped us to improve our situation. At the same time, however, there is still enough time to look at the things that still need to be done, and to make progress on them. What are the steps that you should be taking right now to ensure a successful finish to your year?

1. Retirement Plan opportunities – Every American with a 401(k) retirement plan at work possesses the opportunity to improve their financial security, and perhaps their income tax situation, simply by utilizing this benefit. In 2020, every American with a 401(k) can contribute up to $19,500, and those who have reached the age of 50 can contribute up to $26,000 for the current year. Even if those levels are not feasible, make sure that you are contributing enough to receive the full match from your employer at your current contribution. Simply bumping your current contribution by 2-3% can create a significant improvement in the long-term.
2. Flexible Spending Plans – If you are enjoying the benefits of a Flexible Spending Plan at work, either for Health Care or Child Care expenses, this is a great time to evaluate how much you have left to spend before year-end. This is critically important since these are “use it, or lose it” accounts, and unused dollars are wasted. If it looks like your medical reimbursements for the year appear lower, consider finding expenses to move into the current year so that you can use every last dollar. Need a new pair of eyeglasses? Move an annual checkup from January to December? Complete them prior to year-end and get them on the current year.
3. Schedule a planning meeting with your CPA – This year has been an incredibly challenging one for all, and more than ever it is a wise idea to spend 30-60 minutes with your CPA or tax preparer to review the expectations for the year. Collect your pay stubs, your investment information, and review your expenses and potential deductions, and get them to your accountant so that they can “mock up” your 2020 income tax return and provide educated projections. Should you expect a refund? Are you going to owe more than expected? Are there things that you can do now to improve the outcome? Don’t wait until April 15^th for an answer that is hard to stomach. (And if your CPA is not interested in planning ahead, you still have time to find a new one before the end of the year.)
4. Review your expenses and cash flow – “I spend how much on coffee?!” Let us face it, no matter how frugal we believe ourselves to be, we each have areas within our spending patterns that could likely be adjusted. Thanks to programs like Quicken and Mint, tracking these spending patterns is easier than ever. And with so many of us on automatic payments to our vendors, when was the last time that you really asked if you could get a better price? Do you qualify for your Satellite TV provider’s $50 monthly customer loyalty discount? Is your home security provider willing to reduce your current monthly fee since you do not use every benefit that your system has to offer? Is your pest control service willing to waive the December quarterly bill since wasps are not a huge problem around the pool when the snow is flying? If you don’t ask, the answer is always “no”.
5. Ask “What has changed?” – Life gets so busy at times that it is too easy to lose track of the changes that happen in a given year, and how those changes may impact us. Have you retired a mortgage? Has a child or grandchild graduated from high school (triggering new educational expenses) or college (creating less required spending)? Did you change jobs, and if so have you found the experience to be financially enabling, or is it creating new challenges? Has it forced you to rethink how you will approach your family’s health or insurance benefits when open enrollment comes up again in just a few short months? By taking the time to think through these issues now, you will find that you not only arrive at better answers, but that your stress level in getting there will be lower as well.

With as hard as you have worked this year to help your family to get ahead, don’t miss an opportunity to improve your situation with a few simple actions. The hour of time that you spend may pay you handsomely over the coming months, and should allow for many more nights of restful sleep along the way. Plan ahead, get ahead!