It’s said that time is money, and the equation makes sense. Both are resources we rarely have enough of. In each case, we aspire to save more, and waste less, and use what we do have as productively and efficiently as possible.
But does a gift of extra time automatically translate into extra money? Once every four years, we get a chance to test this out. At the end of this month, we’ll get an additional 24 Leap Year hours to add to the annual allotment of 8760. The challenge then is to use this special allotment to build our wealth and financial well being.
Here are some things you can do to turn those additional hours into more wealth this February 29th:
Spend some time understanding the important inflection points in the tax code. Our tax laws are chock-filled with thresholds which determine applicable tax rates or whether certain income streams such as Social Security or investment income are subject to extra taxes. The code also establishes income ceilings that limit deductions, credits, and the eligibility to contribute to a Roth IRA or take an IRA deduction. It’s impossible to memorize them all, but an hour or two spent reviewing some of the key provisions can help you make strategic tax moves that really pay off.
Set up an auto transfer to move funds from your paycheck to a savings account. As both a time and money saver, this step will make sure that you, unlike most Americans, have an emergency fund. It will prevent the hassle and the cost of resorting to high interest credit cards when something big and unexpected comes up.
Plan your summer vacation. Most of us start day-dreaming about the summer while we still slogging through February, but dreaming is not planning. Get specific now about where you want to go, where you will stay, and how you will get there. Plan out your days and meals and make a budget. With three or four months to do some research, you can take advantage of special rates and deals. Being unprepared is bound to cost you extra money.
Review your menu of employee benefits. Most people wait until they’re up against the open enrollment deadline for making their selection of employee benefit options. Given the time pressure, they may “point and click” without doing much thinking about which option may be best for them, in terms of their own needs, budget, or tax situation. Cases in point: choosing a low deductible health care plan when opting for a higher deductible might result in net savings for your family, or using your pretax cafeteria plan for childcare, when it might make more sense to take a child care credit on your tax return. Taking the time to do the number crunching, either yourself or by hiring a CFP® professional, translates into real money.
Practice being retired. Leap Day falls on Monday this year, and there’s nothing like a Monday to get you thinking of a future when that particular week day will no longer be the start of a new work week. How will you spend those retirement days? Gardening, taking courses, travelling? By imagining yourself retired and thinking how you’ll spend your time, you will gain good insight as to how you’ll spend your money. This in turn may alert you to the need to save more now, reallocate your portfolio, or reconsider your reasons for staying in a house with three spare bedrooms when there will be just the two of you. Thinking ahead to the lifestyle and changes you want to make in retirement is an important first step to using your money and time in the most efficient way possible.
Many people dismiss Leap Day as a temporal “tune-up” – necessary to keep our seasons and calendars in sync so that January weather doesn’t start drifting into August. But it’s a great day for a money tune-up as well: getting our financial goals and choices aligned, so we can March (ouch…) forward confidently knowing we are making the most of the time and wealth we have.