6 Personal Finance Objectives to Focus on This Summer

by | Jun 21, 2022 | Asset Management

Personal finance probably might not be at the top of anyone’s summer to-do list. But if the doom and gloom financial headlines have you feeling like you have no control over your personal financial situation, it’s time to shift your focus.

The stock market and economy are largely out of your personal control. So it’s time to unglue those eyeballs from the flashing red screens, and focus on what is within your control this summer.

6 Personal Finance Objectives to Focus on This Summer

Objective #1: Analyze Your Cash Flow

Cash flow can be a bit wonky for some folks during the summer months. Maybe work slows in the summer as everyone is on vacation. Or maybe you depend on a seasonal side hustle and business actually picks up during the summer months. It’s important to notice if there are seasonal differences in your cash flow so you can prepare for them moving forward.

In early 2022, the Bureau of Economic Analysis reported that the personal savings rate is at only 6 percent. 

We know that it’s tempting to spend, spend, spend because the weather is warming up, but we encourage folks to have a personal savings rate of closer to 10-15%. **This is a ballpark amount to aim for.**

This can vary on a month to month basis. Maybe during the winter months you save 20% and during summer it’s 8% , and it averages to 15-20%, whatever works FOR YOU.

It’s important to have fun in the summer months, but also don’t put yourself in a hole!

Objective #2: Review Tax Withholdings

It’s been at least two months since you’ve filed your taxes. Hopefully you’ve adjusted your tax withholdings as necessary, but, if not, now is a good time to do so. You still have about half of the year left to make up for any over or under withholdings.

Just as a refresher, you should take your effective tax rate and set your tax withholdings as close to that as possible.

Step 3: Tackle Your Debt

An alarming 38 percent of adults carry credit card debt from month to month. If you’re guilty of putting off managing your amounting expenses, now’s the time to start planning to pay them off.

While most consumers have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll likely want to focus on managing and eliminating.

As of this writing, the forbearance period on federal student loans is set to expire on August 31st, 2022. But the government has pushed the forbearance back several times now and it’s anybody’s best guess on what they will do next. So stay prepared to start paying them back in September.

Step 4: Revisit Short and Long-Term Goals

A lot can change in a year – marriage, death, divorce, growing your family and experiencing a major career change. Even seemingly small adjustments, like a job promotion or sending a kid off to college, can have a significant impact on your financial status.

We like to take a buckets approach to saving for goals. The idea being, you divide and save your money up into different categories. Here is a brief summary of some potential buckets:

  • Checking Account = Everyday spending
  • Savings Account = Emergency savings
  • Online Savings Account = Short term goals (1-3 years)
    • Examples: home purchase, vacations, home improvement projects
  • Investment Accounts = Long Term goals
    • Examples: Retirement, reducing work hours, vacation home

Objective #5: Reassess Your Risk Tolerance

It’s difficult to know how much risk to take with your investments. Going through downturns in the market can show investors how much risk they can actually handle.

If you can’t handle a 20% drop like we’ve seen so far in 2022, what changes are you going to make to counteract that?

It’s important to reassess your risk tolerance regularly to help keep it in line with your tolerance, goals and market conditions.

But it’s not okay to flip-flop depending on market conditions.

Wanting to get defensive when the market is down, and then wanting to get more aggressive when the market is up is called performance chasing. And it is not a good investment strategy.

Find somewhere in the middle. Where you are participating enough on the upside but also have enough cushion on the downside.

Objective #6: Communicate Your Plans

After you’re done reviewing these areas, it’s important to communicate any changes being made with the people who need to know. Communicate with family members and make sure everyone is on the same page. It’s important to all be pulling in the same direction.

It’s especially important to communicate your thoughts and feelings if you work with an investment advisor or financial planner. Any changes that you want to make will probably have implications for your financial plan. Ask them to walk through the numbers again with these changes in mind.

Once you’ve checked these personal finance objectives off your to-do list, get outside, away from the screens and enjoy the summer months. Don’t spend your summer glued to the TV or computer screen, worrying about the stock market or a recession.

We often joke with our clients that that’s why they hired us, so we can worry for them.

Have a great summer! 

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