NEW YORK (MainStreet) Once taxes are tucked safely away with the IRS, planning for summer travel can begin; however, 66% of Americans do not have a long-term financial plan to assist that process, according to Northwestern Mutual's Planning & Progress Study.
"A good spring cleaning adds diligence and focus to what is a long-term process not a one-time exercise," said Greg Oberland, president with Northwestern Mutual. Conducting a financial spring cleaning before the June 21 summer solstice can help make sense of whether a trip to the French Riviera is feasible this year or next.
"It is never O.K. to reduce your savings rate," said Andy Smith, certified financial planner and investment advisor. "You will always have a reason to delay or reduce if you give yourself a chance, such as summer holidays. Instead, focus on a budget that balances retirement with the ability to live life."
Start by reviewing the status of your income tax return refund, personal earnings and the value of an owned home, because the housing market continues an unsteady recovery.
"Each of these factors combine to create your overall financial strategy so paying attention to each one can strengthen your portfolio and give you a sense of where you stand," said Nick Ventura, CEO and president with Ventura Wealth Management in Ewing, N.J.
Since credit scoring can influence whether a future mortgage or loan is approved, May and June are the perfect months to scrub clean a credit report.
"Request a free credit report through AnnualCreditReport.com and check for any errors that may be negatively impacting your score," said Bethy Hardeman, consumer advocate for Credit Karma, a personal finance and credit score website.
Auditing income and expenses can assist consumers in creating an updated spending plan.
"Look for areas where you spend too much and come up with a plan to make regular savings each month to build your investment portfolio," said Anthony Criscuolo, certified financial planner with Palisades Hudson Financial Group in Ft. Lauderdale. "Ideally you should have some money going into current savings and some into long-term retirement savings."
Like throwing out last season's clothing, it's important to tie up loose ends in a financial spring cleaning by asking creditors to close accounts no longer in use and requesting a lower interest rate.
Don't just focus on asset accumulation and income generation. Mid-year is a good time to seek out wealth protection and risk management strategies, such as life, disability income and long-term care insurance.
"There are many variables that go into creating the appropriate asset allocation, such as cash flows, time horizon to retirement, emotional tolerance for losses and taxes," said Duncan Rolph, partner and managing director with Miracle Mile Advisors. "A tax efficient allocation should include a hefty dose of tax-free municipal bonds and equity oriented ETFs."
Finally, check in with your tax preparer about any new deductions or credits you may qualify for. For example, the Retirement Savings Contributions Credit or Saver's Credit is available to low- to moderate-income workers who are saving for retirement.
A tax credit up to $1,000 is allowed for single filers and $2,000 for married couples, but only 23% of American workers with annual household incomes of less than $50,000 are aware of the credit, according to a Transamerica Retirement Survey.
"It's critical that we raise awareness of this important tax credit and opportunity to save for retirement so that more workers can take advantage of it and improve their retirement outlook," said Catherine Collinson, president of the Transamerica Center for Retirement Studies.
--Written by Juliette Fairley for MainStreet