With everything that happens in May, your pocketbook can take a hit but here are some tips to survive the month financially.
ALBUQUERQUE,N.M. — Dubbed the “December of spring,” May can quietly become one of the busiest and most expensive times of the year for many families.
Why is that? Think of everything that happens in May, from school ending to graduations to Mother’s Day and more.
“Summer travel begins. This year in particular, gasoline is at a 4-year high, so it’s going to hurt us a little bit more. End of school activities, all the end of the year activities that happen has a cost with it. Graduations, graduation gifts, presents, parties… and also summer camps coming up. It feels like May has so many birthdays that it just eats into our pocketbook a little bit,” Oakmont Advisory Group’s David Hicks said.
What do we do? How do we plan for this?
“One of the best things you can do is plan for it in advance. Obviously, just like December, treat it like a holiday month, because it is one of those things. We don’t want to go into summer in debt before all of these expenses start piling up,” Hicks said.
Hicks added tax refunds are helping people this year. Because of no tax on tips or overtime, families getting bigger credits and people not paying as high of taxes on their Social Security, refunds are up 11% from last year, he said. That is helping people save some money on expenses this May.
However, it’s important to remember the rule of thirds. Use one-third of your money for past debt, one-third for future savings and one-third for future enjoyment.
“Spend some of that money on something fun. We all want to go do something. Enjoy that money when you get that back. Save some of it and then invest in something financially. Whether that be paying off credit cards or saving for the future,” Hicks said.
Another recommendation is to put money into emergency savings, like a high-yield savings account that can earn up to 3.5% in interest.
“Let it sit there, earn a little bit of interest, reduce some of those credit cards, that debt, if you’re paying 20 to 28%. Put some money toward that and then fund an IRA or a Roth. There’s still time to do so, that money will invest and compound over time and help you in the future to save some of your money for the future,” Hicks said.
IRA limits are up to $7,500 if you’re under 50 years old. The money put in compounds into money you can use for retirement but the principle can be used throughout your life.