5 Financial Housekeeping Tips for 2021

By Mitchell J. Smilowitz, CPA

It’s tax season. A perfect time for financial housekeeping. We are already reviewing our income and expenses so it’s easy to look at the “big picture” of our finances.

This is especially important for those in their 30s, 40s and 50s. You’ve got many competing goals – paying for a home, putting children through school, preparing for retirement. Now is the time of year to see if you are still on track.

1. Make, or update, your budget.

When you see where the money goes, you can divide it into necessities, discretionary purchases and savings. Necessities include expenses such as your housing, food and utilities. Discretionary spending includes restaurants, entertainment and travel. Savings include money you are putting aside for your children’s education, emergency savings (3-6 months of your necessary expenses) and, of course, your retirement.

2. Do some pruning.

While you’re looking at your spending, keep an eye out for expenses you can reduce or eliminate.

  • Cancel monthly subscriptions you no longer use such as gym memberships and magazines you don’t read.
  • Negotiate a lower premium with your auto insurance company, especially if you are driving less.
  • Consolidate multiple credit card accounts, keeping those that offer the lowest interest rate, the lowest annual fee and/or the rewards program that best suits your lifestyle.
  • Consolidate your savings accounts into the banks offering the best interest rates.
  • Consolidate your retirement accounts with the JRB; you’ll get a better sense of the big picture.

3. Back to basics.

#1 basic – pay down debt. Start with credit cards charging the highest interest rates. Consider asking your credit card issuer for a lower interest rate. For those who refuse, make paying off the high-interest card a priority and consider cancelling the card once you pay it off.

Also consider whether you can reduce your monthly mortgage payment. Mortgage rates have dropped significantly; ask your lender about dropping the rate on your current loan. If your current lender refuses to offer a lower rate, don’t hesitate to see what another lender can provide.

4. Revisit the “3 Rs.”

  • Review your financial plan and goals.
  • Assess your risk tolerance.
  • Consider rebalancing your investments.

The pandemic has prompted many people to reconsider their goals. Some people have decided to relocate. Others are planning weddings, having children or retiring early. To explore the implication of these new goals on your financial plan, you can use the calculators available on the JRB’s website or contact the JRB directly for a consultation.

Have you evaluated your risk tolerance recently? Your comfort with risk can change over time. Use this quiz to determine your risk tolerance.

If your risk tolerance has changed or investment results have caused your portfolio to drift from your targeted asset allocation, consider rebalancing.

5. Daydream.

Once you’ve done the hard work, it’s time to daydream about retirement. Even if you don’t plan to retire for 30 or 40 years, you can use the pandemic work-at-home experience to begin thinking about how retirement might feel.

Do you want to move somewhere warmer? Less crowded? Closer to your children? How important is travel to you? The ability to engage in your hobbies? How much do you want to work when you retire? What parts of your job would you want to continue?

Wherever your daydreams take you, this is a good time for financial housekeeping. If you’re like most of us, tax preparation already has you sifting through the raw materials you need for a more thorough review. The JRB can assist. Contact us via email or call 888-JRB-FREE (572-3733) to put your finances into long-term perspective.


February 2021