The Why
Last month we introduced the “2×2” financial wellness planning system. Why is it called 2×2? You set aside two hours on the calendar two times a month to complete a predetermined financial task. With this modest but consistent effort, you’ll sustain financial health and build wealth in easy bite-sized chunks that you check off the list each month.
Why is this system so practical? Most of us start the year with financial resolutions and good intentions, but over half don’t follow through. That’s where this system helps. It makes what seems a vague and overwhelming year-long task easy to comprehend, manage and put into action.
We covered the February to-dos last time but if you need a reminder here is a link.
Further below you’ll find the March activities. But first here is a recap explaining what the 2×2 system is. If you don’t need the reminder just skip it.
The What
The 2×2 System is a new approach to financial wellness designed to break down money mastery into a series of straightforward tasks to check off as the months go by. How do you make it work for your situation and goals? For the best success using the 2×2 System, set aside a recurring time slot every two weeks. For example, if Sunday midmornings tend to be a slow time for you, consider making that the time your money magic happens every other week.
Alerts or reminders are vital to achieving all you want to with this program. The best tactic for maximizing the system is to set two reminders on either your smartphone or computer for each session. The first is for the off week to remind you of the following week’s task and give you some time to prepare any materials you might need. The other alert is for 30 minutes before your actual 2×2 session starts to allow you to wrap up any other tasks you’re working on and prepare yourself for complete concentration.
A few more pointers before getting started:
- Do whatever you can to make your 2×2 sessions as pleasant as possible. Put on comfy clothes, pour a stimulating beverage, and play music if it helps you stay focused and motivated.
- If you’re married or manage your money jointly with a partner, try to conduct the 2×2 together. It’s a great way to keep the lines of communication open and stay on the same page financially.
- Set up the reminders to recur annually, so you don’t have to enter them all over again next year.
- Make sure to adjust your reminders around any vacation time you have coming up.
- Because the last week of November and the last couple weeks of December tend to have a lot going on, you should avoid scheduling 2×2 sessions during those periods.
- To keep yourself fully organized, add other important deadlines to your reminders, like quarterly income tax payments, property tax installments, and the December 31 deadline for 401(k) contributions.
- Have a little treat lined up for yourself after you finish each session. You’ve put in the work, and you deserve a reward!
As always, you don’t need to go it alone. Your Credit Union is here to bounce your ideas off and provide candid feedback and advice. No question or issue is too small or insignificant. To give you a bit of inspiration take our free Financial Wellness Check (ideally twice a year) to find low hanging ways of earning and saving more. Also use it to avoid financial pitfalls that can cost you dearly.
March Session 1: Complete a Spending and Savings Plan
You probably know it as a budget. If that’s your preferred nomenclature, by all means, go with that. But the b-word can feel restrictive, like being on a diet. Thinking of it as a “spending and savings plan” helps you keep the focus on using your money for the things that matter most to you. Your Credit Union has a best in class interactive online budgeting module that simplifies the task as it guides you through what’s needed.
Tip: Handed a budget worksheet, most people will fill out their expenses first and then dedicate whatever money is left over to their big-picture goals. Thinking of your goals as essential expenses instead and adjusting your other expenses around them can go a long way toward faster achievement of your aspirations.
March Session 2: Do My Taxes
If you plan on working with a tax pro this year, put aside some time to gather all the information you’ll need to submit well in advance to avoid last minute scrambling. Further below are a few tips. [Note: always consult a tax professional for the most current/personal advice].
Utilizing an online filing service instead can make sense if your situation is relatively straightforward. However, if you fill out your taxes on paper and make the calculations yourself, you’ll likely need to allow for more time.
If the results of your filing don’t come out as positively as you’d hoped, this is also an excellent time to review your withholding information for a better outcome next year.
Tip: If preparing for this year’s tax filing felt like chasing ants in the jungle, consider using part of your time in this session to create an organizational system for your important paperwork. Creating a centralized physical or digital location for all your important documents can make the tax process much less stressful.
- Obtain the Right Tax Form
Make sure you get the right tax form for your individual situation. Many people will use the same one they used for the previous year, but if your circumstances have changed, you may need to use a different form. The options for most employed individuals are the 1040EZ, the 1040A, and the 1040. To know which is right for you, visit the IRS website at www.irs.gov. - Gather Personal Identification Information
Of course you will need to know your own Social Security Number, but you may need to know a few others as well. These may include those of your spouse, children, childcare provider, and anyone to whom you pay alimony. - Gather Income Information
Your next task is to collect all of your income information. Depending on where you derived your income, you will need documents to reflect this. Here are some of the more common categories: Wages and Salaries, Interest Received, Dividends, Business Income, Capital Gains and Losses, Pensions and Annuities, Retirement Plans, Rental Income and Expenses, Unemployment Compensation, Gambling Income and Losses, Scholarships, Fellowship Grants and Other Grants, Social Security and Equivalent Railroad Retirement Benefits, Passive Activities – Losses and Credits, Stock Options, Canceled Debt, and Form 1099-C (Cancellation of Debt) - Collect Deduction/Adjustment Information
If you plan to itemize your deductions or adjust your gross income, make sure you account for everything. Depending on what you are able to deduct/adjust, you’ll need to have records for such outgoing expenditures, like:
- Mortgage interest
- Real estate taxes
- Rent
- IRA or other retirement plan contributions
- Miscellaneous investment related expenses (such as safe deposit box fees if used to store investment documents and computer depreciation if used to track assets)
- Early investment withdrawal penalties
- Medical/dental bills
- Moving costs
- Charitable donations and volunteer expenses
- Auto loans and leases for vehicles used for business
- Student loan interest
- Alimony
- Un-reimbursed job-related expenses (travel, uniforms, union dues, education)
- Job-hunting expenses
- Child care expenses
- Adoption expenses
- Tax return preparation expenses
