Remember when you made a commitment in January to spend less and save more in 2023? Summer could be a good time to reconsider those goals, say financial advisors. Think of it as “July’s New Year.”
A quick financial review makes sense now, because there’s still time to make adjustments if you’re falling short of your goal — whether it’s building an emergency fund, reducing credit card debt, or resuming student loan payments now that the pandemic hiatus is finally (really!) over.
Many events that lead to spending, such as back to school (supplies and clothes), Halloween (costumes and candy), Thanksgiving (food), and winter break (gifts) are just around the corner. “So it’s a really good time to start preparing for spending later in the year,” said Yanely Espinal, author of Mind Your Money.
Nate Hoskin, a certified financial planner in Denver who focuses on young adults, recommends an in-person “audit.” If that sounds too much like something the Internal Revenue Service would do, think of it as a “financial health check” instead.
Mr. Hoskin, who has a sizeable TikTok following, urged a sober assessment of the goals you set out at the start of the year. Let’s say you wanted to save $500 a month, but you only saved $200 a month. “Be really critical and ask yourself, ‘Why didn’t I achieve this goal?'” he said.
Did you estimate that you would make more money than you actually had? (Perhaps a part-time job wasn’t as lucrative as expected.) Or have you gone out to dinner too often? Inflation may have increased your costs, but now they’re cooling.
Mr. Hoskin recommends printing out bank and credit card statements and using a highlighter to mark “unimportant” things, i.e. money you didn’t have to spend.
To get back on track, build your goal incrementally. If you’ve been able to save $200 a month, that’s great, said Mr. Hoskin. Try to save $250 next month, then aim for $300. “Try to hit $500 a month by the end of the year,” he said.
If your plan was vague to save up any leftover funds at the end of the month—but it never seemed like there was anything left—try a “save first” strategy. Automatically transfer 15 percent of your salary into a savings account (your bank, employer, or various money apps can help with this), then create a spending plan for the remaining funds.
“Moving could help you a lot,” Mr Hoskin said.
Ms Espinal said you could try making saving more of a habit and transferring money towards your goal weekly or even daily.
Jesse Mecham, founder of the You Need a Budget app, advised you – and your partner if you’re part of a couple – to start by making a list of what you want to spend your money on. Pay for a holiday abroad? Set up an emergency fund?
Then, he suggested, take a look at your bank statements and scroll through the transactions for the past month, which might take 20 minutes at most. Many banks and credit cards automatically categorize purchases, which can give you a rough idea of where your money is going. Jot down any expenses that moved your priorities forward, but don’t blame yourself for purchases that didn’t.
“No one is perfect,” he said.
Knowing this, Mr. Mecham said, set goals for the money in your bank account by asking, “What do you want this money to do until I get paid again?” You can use a budgeting app or a simple spreadsheet to create a plan.
When you know both your available cash and your goals, you’re better able to make compromises, Mr Mecham said. Instead of thinking, “I can’t spend money on this,” you can say to yourself, “I’d rather spend money on this.”
Paying off credit card debt is particularly timely this summer, as both card balances and average card interest rates are high. The free online debt settlement tool at Calculator.net can help you figure out how much extra you can pay and how long it will take to clear the balance, Ms Espinal said.
Don’t get bogged down in the debate about whether to use the “avalanche” method, which gives priority to paying off the debt with the highest interest rate, or the “snowball” method, which pays off the smallest balance first, to build a sense of accomplishment.
“Most people should take a hybrid approach,” Ms Espinal said. Start by paying off a small balance to gain confidence. Then switch to repaying cards with high interest rates (put money towards the highest interest rate and make minimum payments on the other cards until the first card is paid off) to save the most money.
Pick a specific date for your investigation to ensure it’s completed before the end of the summer, said Rob Williams, managing director of financial planning at Charles Schwab. “If you put it on the calendar, you can become financially healthy,” he said.
Here are some questions and answers about conducting a summer financial check:
How can I tell if my salary withholdings are correct?
Summer is a good time to review withholding tax – the amount of tax withheld from your salary – especially if you’ve received a raise or a major life change, such as a new job. B. a marriage or the birth of a child. If you have too little withholding, you could end up with an unexpectedly high tax bill next April. The IRS offers an online estimator that you can use to answer a few questions to see if you should optimize your withholding taxes. To make changes, submit an updated Form W-4 to your employer.
How can I see my credit report?
Checking your credit report, which catalogs your credit history, is a smart move and can usually be done online relatively quickly. The big three credit reporting agencies — Equifax, Experian and TransUnion — will be offering free weekly reports at www.annualcreditreport.com at least through the end of this year. If you find errors, contact both the credit bureau and the lender who provided the wrong information, the Federal Trade Commission says.
Are there any special ways to save money when shopping this summer?
Many states have sales tax “holidays” during the summer—days or weeks when state sales tax is waived on the purchase of certain goods, such as clothing or school supplies. New Jersey, for example, where the event runs from August 26 through September 4, provides a tax exemption for computers costing less than $3,000. Some tax experts dismiss the events as political gimmicks, but they remain popular with shoppers. The Association of Tax Administrators provides a list by state on its website.