The COVID-19 pandemic has altered many aspects of our lives. We’ve had to change our daily routines, work differently and socialize differently. While these changes have been difficult for many, they may also bring opportunities to revisit and possibly reduce our spending.
Here are some ways you can reduce your budget without sacrificing your quality of life.
Reduce Your Car Insurance Premium
If you are working from home or just spending less time on the road, consider calling your insurance company to let them know. Some of them will ask you to fill out an Annual Mileage Discount Form attesting to the fact that you are planning to drive fewer miles this year. This simple act could lower your car insurance premiums for the year.
Review Your Dependent Care FSA Contributions
COVID-19 pandemic closed many schools and camps. You may not be spending what you budgeted on childcare. To help with the situation, the Internal Revenue Service came up with a partial “fix” by allowing employees to make mid-year changes to their dependent care FSA contributions. You can change, sign-up anew or revoke how much pre-tax money you put into the account.
Refinance Your Mortgage
With interest rates at or near all-time lows, mortgage rates once again have dropped. If you didn’t get a chance to refinance in the last few years, this may be a good time to start looking. Current 15-year mortgages are below 3%. If you can afford the monthly payment, a low interest rate shorter-term mortgage can save you a lot of interest in the long run.
Consider Not Taking Your Required Minimum Distribution This Year
The CARES Act authorized a temporary waiver of 2020 required minimum distributions (“RMDs”), from IRAs, inherited IRAs, and employer-sponsored plans such as 401(k) plans. If you don’t need the income or have other resources to withdraw from, you should consider skipping or reducing your withdrawal from your retirement accounts. Any distributions from these accounts (with the exception of Roth IRAs and Roth 401Ks) are considered ordinary income for tax purposes. You are likely to save on your 2020 tax bill by not making the withdrawal.
Discontinue Unused Subscriptions
The pandemic threw a wrench in our daily routines. Many in-person classes have been cancelled or moved online. Travel plans were altered. As you reestablish your new routine, take stock of the subscriptions and services you are still paying for but no longer use. These are prime candidates for you to suspend or cancel.
Summing It Up
Life looks different today than just 6 months ago. Some changes are temporary, but others may be here to stay. We recommend that you take some time this summer to revisit your budget and “right-size” it for your current lifestyle. At Blankinship & Foster, we are always looking for ways to help make our clients’ lives better. Contact us today to learn more about what we can do for you.