10 Personal Finance Tips for Second Quarter
From funding your retirement accounts to taking care of taxes, there’s a lot you can do in the second quarter to make sure you’re financially on track. Yes, even in the middle of the COVID-19 crisis. Keep reading for 10 personal finance tips for second quarter.
#1 Review Your Goals, Budget, and Cash Flow
Every American has been affected by this global health crisis–some more than others.
Whether your job is secure and you’re working remotely, you’ve experienced a temporary pay cut, or you’ve been laid off…
Now is the time to review your 2020 financial goals and assess what you’ve accomplished and what might need to shift due to this crisis.
If you have to, adjust your budget and cut back on expenses. Also, see where your goals might be a bit unrealistic or where you under budgeted, and then make adjustments.
Also, review your cash flow.
Monitoring what you’re spending your money on helps you analyze what you can cut and apply it toward your retirement savings or savings. Even if it’s just a few extra dollars, every little bit helps.
#2 Rebalance Your 401(k)
It’s the second quarter, which means it’s a perfect time to rebalance your 401(k).
When it comes to the market, the only constant is change. The stock or mutual fund that you chose last quarter may or may not necessarily still be going in the right direction for you.
If you aren’t rebalancing your account allocations, you may experience much larger losses in down markets and may miss the opportunity for growth during good markets.
Which is why this personal finance tip for second quarter may help you earn and keep more of your hard-earned money.
We recommend rebalancing your account allocations every quarter, or four times a year. This way, you can make the appropriate changes in order to stay on course with your savings goals.
We also recommend getting third-party advice because those who do rebalance on their own often fail to manage risk through proper asset allocation. Rebalancing only the percentages of current holdings does not consider current market and economic conditions. This may result in more significant losses during bad markets.
Related: What Every Investor Needs to Know about Rebalancing Their 401(k)
#3 Fully Fund Your IRA for 2019
If you have an individual retirement account (IRA), and you haven’t fully funded it for 2019, you are in luck. Typically, you have until April 15, 2020, to do so.
See what you can do between now and then to max out the contribution limit for 2019, which is $6,000. Remember, every little bit helps so if you only have an extra $300 to contribute, do it!
#4 Contribute 1% More to Your 401(k)
There’s a lot of uncertainty right now. We get it.
With the recent ups and downs in the market, many people have reached out wondering, Should I still contribute to my 401(k) right now?
Our answer: YES.
Watch the video below for the reasons why…
No matter your financial situation, you can make more of a difference in your retirement savings than you might think just by saving 1% more than you did last quarter.
Bumping up your contribution 1% over last quarter might not seem like a big deal, but it adds up over time.
Let’s say you earn $60,000 a year. If you saved an additional 1% of your salary, you’d only have $50 per month taken out of your paycheck and put into your 401(k).
If you contributed 1% more starting in April, you could save an additional $450 between now and December 31, 2020.
No matter your financial situation, you can make more of a difference in your retirement savings than you might think just by saving 1% more than you did last quarter.
Bumping up your contribution 1% over last quarter might not seem like a big deal, but it adds up over time.
Let’s say you earn $60,000 a year. If you saved an additional 1% of your salary, you’d only have $50 per month taken out of your paycheck and put into your 401(k).
If you contributed 1% more starting in April, you could save an additional $450 between now and December 31, 2020.
Related: How to Easily Boost Retirement Savings This Year
#5 Fund That Emergency Savings Account
This personal finance tip for second quarter is an important one: ensure you’re funding your emergency savings account every month.
In the midst of the COVID-19 health crisis, sadly, too many Americans are realizing how important saving is.
According to the US Federal Reserve, 4 in 10 adults would either not be able to cover $400 worth of unexpected expenses or would cover it by selling something or borrowing the money.¹
Having an emergency fund helps cover unexpected expenses without stressing, or having to borrow or carry a balance on your credit card. When something unexpected arises, the last thing you need is to go into debt to pay for that new AC unit, an emergency vet bill, or car repair.
When this happens, it makes it harder to pay it back and continue saving and covering living expenses.
It’s a vicious cycle, and one you can easily get out of if you commit to funding your emergency savings each time you get paid.
Even if it’s setting aside a few dollars here and there, every little bit will make a difference in the future.
#6 Get Your Taxes Done, If You Haven’t Already
Due to COVID-19, the IRS has pushed back the tax deadline for individuals and businesses from April 15, 2020, to July 15, 2020.
According to the IRS, “Taxpayers may also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.”
You do not need to file a form or call the IRS to qualify for the automatic deadline and payment relief change, unless you plan on filing past the new July 15 deadline.
The deadline to file extended returns remains unchanged. Extended returns are due by Oct. 15, 2020.
Read the full IRS statement here.
#7 If You’re Expecting a Tax Refund, Give Your Retirement Savings a Boost
Another personal finance tip for second quarter that can boost your retirement savings is to invest your tax refund.
Instead of holding onto that cash right now or spending it on more takeout, spend it on yourself and your future. The best part is that if you invest your refund into your 401(k) or IRA, it won’t affect the amount of your take-home pay.
If you add to your 401(k), it needs to go through payroll deduction. We recommend you contact your Human Resources department, tell them the amount you want to invest, and they will take it out of your paycheck(s). Then use your tax refund to live on and make up the difference during this time.
If you have a traditional or Roth IRA, you can use IRS Form 8888 and redirect your refund into your IRA. Or, if you’re currently set up for automatic monthly contributions from your bank account, make a one-time payment for the amount of your refund.
Related: The Smart Way to Spend Tax Refunds Wisely
#8 Pay Estimated Taxes On Time
Typically, your Q1 2020 quarterly tax payment is due by April 15. Q2 estimated taxes are due June 15.
The IRS has extended the April 15, 2020k, quarterly tax payment for those who are self-employed.
However we encourage you, if you can, to go ahead and make payments.
The last thing you want is to get stuck with a large tax bill come 2021, so make sure you pay estimated taxes on time.
Federal estimated taxes can be paid online at https://www.irs.gov/payments. Many states allow you to pay estimated state taxes through their state department of revenue websites. Check with your state to see if you can pay online or need to mail your payment.
#9 Review Your Credit Score
It’s important to check your credit score every so often to ensure the information is accurate.
With recent data breaches and the fact that they are only going to continue to happen, there’s no time like the start of second quarter to request a report and verify nothing is showing up that’s not yours.
While you’re at it, check your credit card statements and bank accounts for any fraudulent activity. Most banks and credit cards have fraud programs that will alert you if something is fishy. If you aren’t already signed up to receive fraud alerts, make it a point to do it now.
Related: 6 Things Consumers Can Do to Protect Privacy and Online Data
#10 Get Professional Third-Party Help
This final personal finance tip for second quarter may make a significant impact on your overall financial health and your retirement savings.
It doesn’t matter how far away from or close to retirement you are or how much money you’ve saved. Nor does it matter how much debt you have.
Speaking to a third-party expert now can help you get on track and stay on track with your financial goals.
Think about it this way: Even the best athletes in the world have coaches!
Concerned about your 401(k) and want to speak with an expert?
Click below to book a complimentary 15-minute consultation.
Sources:
- https://www.federalreserve.gov/newsevents/pressreleases/other20180522a.htm
- https://www.vacasa.com/discover/summer-travel-trends-report
