Like the seasons in the year, investors often follow a cycle that changes with the weather. Knowing about the cycle and how it affects finances can help advisors and investors.
“Clients have three seasons: spring, summer and fall,” says Andy Rice, vice president of Money Management Services, an independent RIA firm in Birmingham, Ala.
The seasons, Rice says, move to different rhythms. “Spring is all about taxes. Summer is time for vacation and to relax. Fall is the time to get everything done; the kids go back to school, and of course, Christmas is coming,” he says.
While summer has its own set of traps for investors, all the seasons have distractions, a fact that Diane Winland, a CFP, CPA and resident financial planner at Financial Finesse, underscores. “There’s a fall hangover,” she says, when the credit card bills from spending on summer vacations and back-to-school clothes and supplies come due. “Then there’s a Christmas hangover in January” when the presents have to be paid for.
What Your Peers Are Reading
Both Rice and Winland say the problems all come down to the same thing.
“It all gets back to setting goals,” Winland says. “What do I need to reach these goals? You probably need to save money.”
Planning, for vacations, the purchase of a summer home, and even Christmas presents, must start at the beginning of the year.
“Clients have so much focus on their daily lives,” Rice says. “The biggest mistake is not budgeting for big ticket items throughout the year.”
Most people’s biggest investment is their home. If they have a vacation home, that ups the ante. And it’s likely a vacation home is an area that is subject to hurricanes and other storms that strike coastal areas. It’s important that clients consider the cost of getting a home storm-proofed when they decide to buy a vacation home and when they make a yearly budget.
2) Summertime and the Living Is Easy—If You Save for It
Summertime means relaxing, but kicking back often comes at a price. The days of the “staycation” seem to be just a memory. Winland says people these days think, “been there, done that. We need to go somewhere.” Vacations and summer homes can be costly. Paying for them can blow a hole in any savings plan. That’s why it’s important to plan ahead and look for bargains. Using frequent flyer miles to get to your vacation destination can help ease the cost and leave some money for having fun once you arrive.
One way not to fund your summer vacation: a 401(k) loan. Data from Charles Schwab show requests for 401(k) loans jump about 16% on average during the June through August period.