What are your childhood summertime memories? Some may recall picnics on the beach and spending hours in the water, others reminisce long car rides on family vacations and many remember summer jobs. As we take a break and enjoy the sunshine, also take the time to do a quick self-exam and see if we’re on a good financial track within a few key areas:
Take a second and imagine the relief you’ll feel when you’re free of debt. Now, what if I said you can achieve that feeling sooner than you think? Paying off your 18 percent interest credit card is generally more advantageous than making minimum payments and investing the difference. Consider applying the “Snowball Method” to attack multiple debts (various credit cards, student loans, etc.) You start by designating a specific monthly amount in your budget for debt repayment then line up your debts in increasing order of balance owed. After you’ve reorganized, make minimum payments towards all of the accounts and apply the remaining amount in your budget towards the account with the smallest balance. Repeat the process until that account is paid off and apply the excess amount to the following account – hence, the snow ball.
Keep this question in mind, whether you’re car shopping, hunting for a new job or refinancing your home: How’s my credit? Keep your financial house in order by checking your credit report. By law, you’re entitled to a free credit report every 12 months from each of the three rating agencies: Equifax, Experian and TransUnion. Always check for the accuracy of what’s being reported and take action to correct any mistakes. Visit www.annualCreditReport.com to request your free credit report.
Rainy Day Funds
A good rule of thumb is to always have an amount equal to three to six months’ living expenses stashed away in a competitive interest-bearing money market as emergency reserves or a “rainy day” fund. Or have enough saved to cover a year or two of living expenses, especially if you’re retired or have a fluctuating income. Your rainy day fund account may need to be “topped off” to replenish the funds used for your summer vacation, replacement vehicle or that pool table you’ve always wanted.
Many people are not fond of surprises, especially when it comes to a larger than expected tax bill or an underpayment penalty. Some situations that may affect your tax filing status include the birth of a child, another child leaving the nest (no longer a dependent), marriage or divorce. How about a major transaction such as sale of a residence or business, bonus or stock awards or retirement payout? If any of these apply to you, then it may be time to schedule a meeting with your tax professional and adjust your tax withholdings and payments.
What are your plans for retirement and are you on track? Are you saving enough? Are you prudently invested to weather the periodic storms and to last you a lifetime of economic freedom, choices and not being a burden on anyone? Focus on taking maximum opportunity of company benefit programs including company matching contributions to 401k’s, maximum savings limits and catch up contributions. Also, don’t forget to review if you are you eligible to fund a Health Savings Account and are on track to fund the maximum.
Henry David Thoreau said, “One must maintain a little bit of summer, even in the middle of winter.” The warmth, fun and vivaciousness of summer help get us through the cold months and make us anxious for the coming year. Take a moment to assess where you’re at financially, adjust your plan as needed and don’t forget to celebrate the progress you have made. Secure your future wisely.
This article can also be viewed at the Reno Gazette Journal.