The Next Six Months
September still has that New Year smell for me, even though it’s been years (well, decades) since I started a fall school term. And just as you might do in January, now would be an excellent time to think about some New Year’s resolutions. In fact, I would argue that it is even more important right now; the next six months can be particularly dangerous to your finances.
Looking out over the landscape of September through February, there are several pitfalls waiting to happen…and a few opportunities as well.
Holidays. Whatever your affiliation or lack thereof, ‘tis the season for holiday-related travel, gifting, and parties. Any spending discipline that you may have had in the slow months of March or April crumbles when confronted with holiday expectations.
The first rule is realism. If you get on a plane every year to visit family at Thanksgiving, don’t pretend that this is the year that you are staying home. If buying gifts is how you express affection, let’s not assume that this is the year that you will take up home baking and crafting. It is only after you are willing to tell yourself the truth that you can approach the “B” word.
You need to set limits. September is the month to project your cash flow through the end of the year and proactively decide how much of it, over and above your usual expenses and saving/investing, you will spend for the holidays. I’m not telling you to spend less on holiday merrymaking than you usually do; you do you. I am telling you that whatever number you come up with must be one that does not leave you in a negative position on January 1. Don’t start 2024 in a hole.
Yes, we need to talk about taxes. Tax season is a major financial milestone that will fall within the next six months. For some, it is a non-event; perhaps a small payment owed, or a modest refund received. But for many households, it is a seminal moment in their financial year.
If you usually receive a large refund, you need to have a plan for its disposition in place on December 31. Will it supercharge your 2024 investing goal? Make a significant dent in, or even retire a gnarly debt? Make the commitment this year.
On the other hand, if you were in the position of writing a large check to the IRS or your state this past April, or simply just frowned at the amount shown on the taxes owed line, there is still time left to prevent that from happening again.
The remedy is, of course, dependent on the specifics of why you experienced a large tax liability. But if you cannot identify it as having been a one-off 2023 event, possible antidotes for 2024 include:
Increasing your tax withholding with your employer
Increasing pre-tax contributions to your retirement plan
Contributing to a Health Savings Account (HSA)
Making a large charitable contribution (but only if you itemize deductions).
There are enough months remaining in the year for these moves to materially impact your tax liability.
If you have self-employment income, you should be making estimated quarterly payments in September and January. (In fact, if you fail to do so and have significant income from this source, you may be faced with an underpayment penalty come next spring.)
Keeping warm is expensive. If you live in a cold-weather state, you are likely dreading your upcoming heating bill. If so, this is the moment to get on a level billing plan with your utility company to get ahead of the winter billing surge. Under such a plan, you pay a consistent amount all year round, based on your average usage. This means that, for example, your summer gas bill will be higher than usual in 2024 (if you have gas heat), but you will not have crazy, cashflow-wrecking three-digit gas bills over these next six months.
The next few months should come with a “Danger Ahead” sign for your bank account. It is not too much of an exaggeration to say that the decisions you make over these months can determine your state of financial wellness in 2024.
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