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It’s time for a mid-year financial review
New Year’s resolutions are optimistic in nature. Unfortunately they often fall by the wayside as hopeful feelings meet the real world. Gyms offer the classic example: People vow to exercise more and lose weight in the new year. In January, fitness classes and weight loss programs are packed, but by February or March many are back to serving the same number of people they did in the fourth quarter of the previous year.
That’s the most outward and easily identified demonstration of how resolutions are broken, but how about pledges that aren’t so easily identifiable?
NBC News reported that spending less and saving more was one of the most popular New Year’s resolutions for 2017. Whether you made such a pledge or not, the halfway point of 2017 is a good time to evaluate where you stand with regard to saving and spending as part of an overall financial checkup.
If you haven’t been tracking your spending, start… TODAY
People often forget what they spend from one day to the next, and don’t realize how much they pay for the little things. A great example is the person who buys an exotic cup of coffee for $5 or $6 a pop every day. If you aren’t tracking your spending, indulgences of that type might be setting you back several hundred dollars month. Tracking those “extra” expenditures gives you the ability to see their cumulative effect on your overall financial picture and, ideally, motivates you to be more mindful before you splurge.
There are many computer programs and smartphone apps you can use to track the outflow of dollars, making it easier than ever to understand where you can stem the spending tide and how you can divert more money to savings.
Make sure you control your credit, and not the other way around
- Do you have one or more credit cards and do you pay those in full every month? If you answered “yes” to the first part and “no” to the second, then you’re flirting with danger. It might be wise to pay off the credit cards with a debt consolidation loan and get rid of the plastic altogether. Debt consolidation loans usually come with interest rates that are less than what the credit cards charge. Once you get the loan and ditch the cards, pay cash for what you can afford and pay off the loan on an accelerated schedule.
- Have you checked your credit reports this year? If not, request one from each of the major credit bureaus: Equifax, Experian and TransUnion. You can get a free report from each once per year. Some savvy individuals space their requests out so they get a free report every four months. The information reported by the agencies is so similar, it is a great way to keep a consistent check on your credit and guard against identity theft. You will be able to spot questionable activity quickly and take actions to head off problems.
- If you have a home loan and/or a car loan, verify the interest rate you’re paying and consider refinancing either or both. When you’re dealing with large loan amounts, a difference of even one percent in rate can translate to a significant difference in total payout over the life of the loan.
Set something aside for the future
- Have your savings grown as you hoped they would? Savings are essential – an unexpected expense could quickly put you in a deep financial hole if you have little to nothing in reserve. Building a rainy day fund offers the peace of mind knowing you could sustain a financial hit without going deeply in debt.
- Are you saving for retirement? The earlier in life you start putting money into your retirement plans, the better. When you’re young it seems like a distant goal and putting money into a retirement account isn’t necessary. It may even feel as if you are giving it away, but check out this article on Business Insider that shows the effects of compound interest, and then think again.
- Are you maximizing your retirement benefits at work? Many employers will match a percentage of the funds you put into the plan they sponsor, based on the amount you contribute. The match is an immediate bonus above and beyond your salary and, in most instances, will be either tax-deferred or tax-free. In other words, if you’re not contributing enough to get the maximum match amount from your employer, you’re leaving money on the table. The good news is that you can make up lost ground during the second half of the year.
If you’ve been remiss in fully executing your financial plan this year, it’s time to make some changes so that you can look back in six months and say to yourself, “Job well done!”