“The space in which we live should be for the person we are becoming, not for the person we were in the past. “ – Marie Kondo
Personal and professional goals tend to bubble to the surface at the beginning of the year. Many people decide to save more, head to the gym three times a week, read a book a month, connect more with their professional peers. Often, these resolutions drift to a halt even before the end of January, and this year the pandemic has compelled us to reconsider existing routines as well. We’re now eight months into the year and you can still take this opportunity to stop the clock and revisit your intentions for 2020.
Periodically taking time to review your financial situation can alleviate stress and give you a sense of control. In a 2019 survey of stress in the US, the American Psychological Association noted that money is a significant source of stress for 60% of Americans. Anxiety can arise when we lack a clear picture of the state of things. We are all spending more time at home than perhaps ever before, and you may be assessing decluttering and house projects that have been put-off over time. Yet there is also the space we occupy within our own minds, the construct of how we view ourselves. This “mental home” can benefit from cleaning and rearrangement – just like your physical home.
Clearing the Path Ahead
One way to support this is to give yourself the gift of a mindful focus on your finances; clearing the way for some peace, and perhaps transformation. Some areas of mental clutter in finances that you could review and consider at the mid-year mark include:
Tax withholdings: If you prefer not to owe taxes or receive a large refund, now is the time to check your withholdings. With a large sum owed, penalties and future estimated taxes may be required. With a large refund coming, there may be an opportunity cost. Are you on track to owe taxes or get a refund? To answer these questions, there are good tax calculators available for use online, and the IRS provides a simple one on their website: IRS Withholding Calculator.
Savings: If cash is accumulating in your checking account that could serve you better in a savings, CD, or investment account, now is the perfect time to take a look. In our minds, we often assume money in our checking account is available for spending, although if we move it to a different account it can help us stay on budget.
If you’re not already maxing out your retirement contributions, consider increasing them with the extra money you’re not spending on travel or your commute. 401k contributions can only be made from regular payroll deductions or occasional bonus income, so waiting until year-end to make this decision leaves you with fewer options. Adjusting earlier in the year could also put less stress on your end of the year cash-flow.
Spending: Looking at how your monthly budget has changed in the first part of the year informs decisions you can make about the rest of the year. Is a rebalancing of your budget in order? Your income may be dramatically different than it was six months ago. Perhaps your childcare expenses are reduced, while other expenses (food, healthcare, etc.) have increased. If you are spending less and saving more, now is the ideal time to adjust finances to your advantage.
Review your subscription services as well: are you still seeing the need for all the streaming services you subscribe to? Netflix/Hulu/Acorn/AppleTV – these add up. Are you still aware of all the online magazine & newspaper access you’ve committed to monthly? If you no longer need your monthly Stitch Fix, then put a pause on paying these subscriptions and simplify your life just that much more.
Giving: Perhaps you resolved to step up your giving this year. There is certainly no shortage of causes in need right now. Consider setting aside automated monthly donations, rather than wait for a large sum to make itself available at the end of the year. Many charitable organizations appreciate ongoing contributions, which help stabilize their finances and provide consistent support.
Automate your intentions: Did you plan to automate your savings and bill payments this year? It’s ok if that didn’t happen when you meant it to in January, then February, then March… take a few moments now to get this launched.
Dreams: Maybe a big goal is to leave on a lavish trip once it’s safe to do so. Making plans for the future can provide a sense of control and stability if you start earmarking funds for those plans now. Take this opportunity to assess your progress on goals such as a big purchase or lifestyle changes. Are there tweaks that can be made now to get you there faster?
Preparedness: Are you in the habit of checking on your finances only when something goes wrong? Now is the time to break this cycle. Set aside time to look at the big picture, and when that emergency does come up, you’ll have already laid the groundwork for available solutions, and can act proactively.
A New Direction
Being mindful in your finances can provide a sense of peace, foster self-care, and provide support for your short and long term goals. Perhaps your current trajectory is just fine, or maybe you are ready to head in a new direction. By taking a mid-year look, you can eliminate the stress of finding yourself at the end of the calendar year without the opportunities for change. The year 2020 has certainly compelled us to adapt and change. Take a moment, and give yourself permission to navigate any change with intention and grace.
As you go through these exercises, it may be a good time to check in with your advisor about changes to your finances and other factors you should consider now. Analysis of this type is at the heart of what financial planners do for their clients, and at North Berkeley we welcome the opportunity to answer any questions and support you through this process.
About Jena Regan, CFP®
Jena is an Advisor and works closely with Lead and Senior Advisors to deliver comprehensive financial planning and investment management.
This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website 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. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.