7 Things To Do Before Summer Is Over
June 29, 2015Most of us would agree that it’s important to schedule regular medical and dental check-ups at least once per year. Whether or not we actually follow through with those wellness visits is another story. I admit to recently realizing that I am long overdue with the scheduling of my annual check-up so last week I dedicated an entire 15 minutes to the schedule so I could get those “should be” routine visits on the calendar.
Since our financial health is an important component of our overall well-being, the concept of annual financial check-ups often gets neglected similarly to those proactive health and wellness visits we should all schedule regularly. Each Monday during the month of May we used this blog to explore a few important items to include in your financial check-up. Here are some other areas to focus on if you are looking to use the summer months as an opportunity to make sure you are doing everything to increase your own financial wellness:
Create a plan to aggressively fund your savings account. Over the course of this year, I’ve met with many individuals and families who are dealing with some major life changes and challenges that have required some type of emergency savings in their lives. A general guideline is to keep around 3-6 months of basic living expenses in an emergency savings fund. Some people are better suited maintaining an emergency savings fund of 6-12 months’ living expenses (especially those in an uncertain job situation or with concerns about the economy). If paying off debt is a current priority, you should at least maintain a starter emergency fund of around $1-2k even if you are in debt reduction mode.
Review your tax withholding. Are you looking for a quick and easy way to increase your take home pay so you can free up extra dollars to save? You may need to adjust your income tax withholding if you’ve had any changes in your income or expenses so far this year or if you’ve received a large tax refund in the past and you’re tired of loaning your money to Uncle Sam at zero interest. It may seem simple and easy to continue with this forced savings program right now but with a little discipline and a few simple changes to your Form W-4, you can put that money from your upcoming paychecks to work for you right now rather than waiting to file your tax return. For a calculator you can use to figure out your recommended tax withholding, visit the IRS withholding calculator or this alternative version from TurboTax.
Establish a separate savings or checking account for irregular expenses. It may be too late to save for that summer vacation if you do not already have a plan in place. However, it’s not too late to start planning for future vacations or to start setting aside money for the holidays or annual expenses such as taxes and insurance.
This is where a planned spending account comes into play. You probably have heard of this concept a time or two before but not everyone has a formal plan in place to prepare for irregular expenses. In fact, these non-systematic expenses are usually the ones that can blow up a budget and create financial stress.
This effective money management technique simply requires us to create a separate account for those expenses that don’t occur on a regular basis but still belong in your personal spending plan. Rather than turning the calendar to December and wondering how to pay for those holiday gifts, taxes, insurance, HOA dues, etc. you can go ahead and work them into your spending plan right now. For more information on setting up a planned spending account system, check out 5 Steps to Successful Money Management.
Schedule a “money talk” with a spouse, significant other, or friend. It is important to have regular conversations about your financial goals if you are married or in a committed relationship. Regardless of your money personality or who normally handles different financial roles (paying bills, spending money, investing, planning, etc.), regular money dates can help couples overcome prior roadblocks to working together as a team. If you do not have a financial planning partner or your significant other is creating significant roadblocks on your path to financial freedom, you can reach out to a trusted friend or family member to serve as your accountability partner or voice of reason. Then again, some of our friends aren’t the best models of financial responsibility so you can always reach out to a CERTIFIED FINANCIAL PLANNER™ professional or financial wellness coach for additional guidance.
Review your membership accounts and subscription fees. With all of the different account subscriptions and memberships that we maintain in today’s connected world, it is easy to lose track of the actual costs of these conveniences. That is why our family does an annual inventory of each account. As a result, Amazon Prime, Netflix, Hulu, Spotify, etc. each face the same question at least once every six months – are you still worth keeping?
If the answer is no, we either cancel our subscription or find a more useful and cost effective alternative. Sorry Mr. Overpriced Cable Television Provider, you didn’t pass the test and we just cut the cord. (Thanks for the extra boost to our savings though). This important step helps us potentially simplify our financial lives. It also fits into the all important discussion of maintaining a personal spending plan.
Verify your debt reduction plan is on track. Not surprisingly, debt consistently remains at the top of the list of obstacles holding people back from reaching their important goals like retirement or simply building up savings. Our latest research suggests that many households are still in need of a plan to reduce or eliminate high interest debt.
If debt reduction is near the top of your financial to-do list this summer, check out our Debt Blaster Calculator to see if you are on track to get those credit card balances and other creditors out of your life. If you don’t have a plan, your mid-year financial checkup should provide you with an excellent place to start. Check out these 5 Steps to Getting and Staying out of Debt for some tips on creating a game plan.
Re-balance your investment portfolio. One investment best practice behavior that most financial professionals recommend is to re-balance your portfolio on at least an annual basis. If you haven’t reset your target asset allocation for current and future investments, the middle of the year is a convenient time to do so. Take advantage of automatic re-balancing if it’s available through a retirement plan at work to simplify this process with a click of the button. While you are examining your retirement portfolio, you can also review your answers to important questions about the status of your own retirement plans.
Financial check-ups may not be as exciting as taking a summer cruise to St. Somewhere, spending time at the lake, hiking the Appalachian Trail, or standing in line for a ride at an overpriced theme park, but they should always be a part of the summer routine. The average American spends more time planning for these types of vacations than planning for retirement. Now is a good time to be anything but average and assess the progress you are making toward important financial life goals.