For most people, summertime conjures images of lounging on the beach or barbecuing in the backyard. With the relaxed attitude of the season, it's easy to justify splurges on sandals, surfboards and other summertime treats.
"A lot of times we'll see expenses increase in the summer," says Scott Gamm, author of "More Money, Please: The Financial Secrets You Never Learned in School." "People are looking to take a vacation and enjoy the warmer weather, but you don't want a financial lifestyle that's completely disorganized." With a little time and discipline, you could actually improve your finances come fall. Here's a look at several savvy money moves to make this summer.
1. Review your spending. July 1 marks the halfway point of the year, so it's a good opportunity to analyze your spending over the past six months and adjust as needed. Jason Hull, owner of Hull Financial Planning in Crowley, Texas, suggests considering the following questions: "Are you spending money on things that truly matter to you? Are you being intentional with your money? Are there leaks? Did you wind up having expenses that you didn't expect?"
Identify your financial and personal goals and consider whether your spending aligns with those goals. This can help ensure you're "consciously funneling money to the things that are important to you instead of letting money fritter away for things that aren't important to you," Hull adds. If, for instance, you're spending money on a boat, or golf membership or a digital subscription you no longer use, consider cutting the cord to free up money for other things.
2. Start planning for the holidays. Total holiday retail sales hit $579.8 billion last year, according to the National Retail Federation. To avoid holiday-related debt come January, set aside money now. Hull suggests creating a side account that's specifically earmarked for holiday purchases such as gifts and travel. Start with the amount you spent on the holidays last year and adjust up or down depending on your anticipated spending. Then divide by the number of months until the holidays.
"Ideally you're doing this in January, so at this point you'll probably have to divide it by six rather than dividing it by 12," Hull says. "The whole idea is that you're setting aside money each month so when those expenses come, you've already got the money there, and you don't have a huge hole in your wallet."
The other reason to start planning now is to avoid overspending on last-minute gifts or travel purchases when you're under a time crunch and have few options. If you're planning to save money by knitting, sewing, painting or otherwise making gifts, it's also smart to give yourself plenty of time.
3. Consider refinancing. Low interest rates make this an ideal time for many homeowners to refinance their mortgage if they haven't already. "Rates are incredibly low right now, so if you're continuing to wait for them to go lower, I think that's a mistake," says Joe Heider, managing principal at Rehmann Financial's Westlake, Ohio, office. If your lender previously denied a refinance due to low equity, try again, especially if it has been a few years, and you've built up more equity.
Also think beyond home loans and consider other big-ticket items you may have financed. "If they own a boat or an RV, interest rates on those types of vehicles are very low, and it may make sense for individuals to take a look at refinancing those," Heider says.
4. Automate savings and bills. Why waste precious summer days writing and mailing checks? Automate your finances so you'll never miss a bill while you're away on vacation or spend money you planned to save. Most bills can be set to auto-pay, and most bank accounts have the option for regular auto-transfers to savings, which eliminates the potential for you to cheat on your savings goals and spend the money instead.
"Go onto your bank's login page, and have it set up where that money is automatically transferred out of checking and into savings," Gamm says. "You don't have to worry about spending that money because you won't have access to it. Force yourself to make do with less money." Even with automation, it's a good idea to manually review your bills and bank statements for any errors.
5. Revisit your retirement contributions. The Employee Benefit Research Institute in Washington, D.C., reports in its 2013 Retirement Confidence Survey that almost half of workers are "not too confident" or "not at all confident" about having enough money for a comfortable retirement. Start contributing to a retirement account if you aren't already, Gamm suggests. "The more time you have, the more powerful compounding interest will be," Gamm says. "It's not how much you put in, but how long you have on your side. Starting it sooner than later is going pay huge dividends."
If you are contributing to an employer-sponsored retirement account like a 401(k) or 403(b), consider bumping up your contributions, especially if you aren't getting the full employer match available to you. Some employers let you adjust retirement withholdings at any time, while others may only give you the option twice a year, according to Heider. If your employer operates on the fiscal year calendar, July 1 may be a key date to remember for tweaking your withholding.
- Personal Budgeting