Believe it or not, summer is just around the corner. The weather is warming up, school is in the home stretch, and the summer plans that seemed far off are now only a few weeks away.
Before kicking off the backyard BBQs and long weekend trips, give your finances a little attention to make sure your plans stay on track while you’re out enjoying the weather. Here are five things you can do to improve your finances in May.
Ways to Improve Your Finances in May
Put your tax refund to good use
Some people are awaiting a big tax refund after filing last month. It’s always good to use a portion of your refund for something fun like a vacation or home renovation; alternatively, you may want to think about some other financially smart things you could do with your tax refund. Putting your refund toward your 401(k) or IRA could help you get ahead on your retirement savings goal. You could also use a portion of it to pay off lingering debt.
If your other goals are in good shape, then you should feel confident about spending it on that trip to the beach. The key is to think strategically about what you need now and in the future.
Check in on college savings
School is likely higher on the radar this month as we enter graduation season and the end of the school year. This month also marks 529 day, which is known as college savings day (it’s 5/29—see what we did there?). It’s a great day to look into college savings plans.
A 529 plan is a popular college savings option thanks to its tax benefits. Contributions grow tax-free, and withdrawals are free from federal income tax provided you use the money for “qualified college costs,” such as tuition, fees, living expenses, books and technology. You may also get a break on your state taxes. Setting up a 529 plan is easy, too.
Become an attractive homebuyer (even if you’re not planning to buy right now)
If you think you might be in the market for a new home in the coming years, now’s the time to start preparing. The market has been particularly competitive, and mortgage rates are higher than they have been in recent history. So the more you research now, the better shape you’ll be in when you start looking.
First, keep an eye on what’s on the market so that you have a sense of what things cost in certain areas. Set a budget now for a new home and make sure you’re saving for a down payment. Get a good understanding for what mortgage lenders look for in a buyer—like credit score, payment history, income, employment history and assets—so you can make healthy financial decisions. You’ll be in a better position to secure good financing when the time arrives.
Discuss the future with your parents
As you celebrate Mom this month, one way you can show her how much you appreciate her is by talking about how you can support her (and dad) in the future. Even if your parents don't need your help now, discussing the future can help them feel confident they’ll be taken care of and prepare you for potential responsibilities down the road.
Discuss topics like whether your parents plan to downsize, where their estate planning documents are located and what their medical wishes may be. Whether it’s reviewing your parents’ estate plan (especially if you’re their trustee), discussing longterm care contingency plans or reviewing life insurance policies, understanding your parents’ wishes now can prepare you to support them when the time comes.
Budget for summer fun
As the days tick down to summer, your list of fun ideas is likely getting longer. Work them into your monthly budget now with some foresight. Map out the next three months’ additional expenses and make a plan for how you’ll account for them. You may need to redistribute some funds or dip into others—that’s OK as long as you know how you’ll keep your other financial goals on track in the meantime.
Even on a tight budget, you can have some fun. Look at budget-friendly activities to do at home or think about upgrading your backyard to make hangouts feel like a getaway. If you are planning to spend on a big trip, give your budget some love by making your travel dollar go further. Putting thought into recreation ahead of time can help you focus on summer fun without worrying about the cost.