By Rianka R. Dorsainvil, CFP® and Lazetta Rainey Braxton, MBA, CFP®
As it usually does, we’ve blinked and are now halfway through another year. As the remnants of tax filing season are being sequestered away, it’s time to access your financial health. What items are you bringing back to the top of your checklist?
Admittedly, we’re all in different places as we begin to emerge from the pandemic. Whether you lost your job, were forced to take time off work to be a caregiver, or weathered the storm financially unscathed, there is a strong opportunity for us all to reassess our financial health.
First: check in with your budget and cash flow
Everyone needs a budget, which can provide a holistic overview of cash in and cash out. One of our favorite tools? YNAB.
Increase contributions. If possible, consider increasing contributions to various savings accounts, or retirement accounts, which may reduce your overall taxable income.
Conduct price checks. Doing a little bit of research to make sure you are receiving fair prices on goods and services (auto/home insurance, entertainment subscriptions, etc.) can be hugely beneficial in saving money. Apply this liberally, and tackle one per week.
Cancel unused subscriptions. There are likely subscriptions you are paying for that aren’t being used. Make a list of all services such as: entertainment, phone apps, etc, and unsubscribe for any that aren’t serving you at this time. Even ten dollars a month can add up to larger savings that can be better applied elsewhere.
Second: review your insurance policies
Understanding what type of insurance policies you need, and how you pay for them, is critical.
Review your life insurance policies. Are there any areas that need updating on your life insurance policy? Life events like remarriage may prompt a need to update beneficiary designations. Other changes like moving will require documents to be updated. Children reaching adulthood, or your retirement finally nearing, may also shift your needs. Make sure you’re up to date.
Consider switching insurance policy payments. If cash flow allows, consider paying these insurance policy payments annually instead of monthly, which could also reduce premiums.
Third: consider refinancing
Finding ways to reap cost savings for large scale purchases like homes and cars is smart. As mortgage rates remain well below average, many people are looking at their best options.
Connect with your current mortgage lender to assess current rates available.
Calculate how much money you could potentially save per payment. Refinancing allows for the possibility to lower your monthly output and help you build in other areas, but only do so if the cost savings seems worth the hassle. Try this calculator to estimate your mortgage refinancing options.
Consider the long term. While getting lower rates decreases money going out, you also want to consider how long you plan on occupying your home or car. Once you look at the payments as a whole from your current standing, calculating your refinance break-even point will give you better insight to whether refinancing is a good option for you.
Start Small, Gain Big.
Tackling your goals and accessing your progress may seem like a heavy lift, but it doesn’t have to be that way. Moreover, the sooner you start, the better off you’ll be. Feeling overwhelmed? Start even smaller with a list of your major expenses and have open conversations with your financial accountability partner about ways to reduce costs and gain savings. Even small progress is progress indeed!