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Financial Literacy

Your Summertime Financial Checkup: Eight Key Components

Completing a financial checkup is time well spent: You can assess your progress toward key goals and make adjustments to keep yourself on the path toward financial well-being.

summertime financial checkup

Revisit your financial goals

Many of us create financial goals at the beginning of the year. Several months later, it’s a great idea to revisit your goals to make sure they’re still appropriate, and to see if you’re making steady progress toward them. Life events—such as having a baby, changing jobs, or moving to a new city—can have a big impact on your financial circumstances, so make sure your goals and plans reflect your current situation.

For example, say you set a goal in January to save $20,000 by year-end to use toward a down payment on a home. In April, you landed a great new job with higher pay. Could you adjust your savings goal upward or accelerate your timeline? Now is a perfect time to check on your goals and fine-tune your plans for meeting them.

Check your credit report and score

You’re entitled to a free copy of your credit report from each of the major bureaus once every 12 months. If you haven’t checked your report in the last year, now is a good time. Carefully review your report for common errors, such as closed accounts reported as open and incorrect payment details.

Make sure your tax withholdings are appropriate

Pull out your recent paycheck and see how much of your income is being withheld for taxes. The IRS encourages everyone to use its Withholding Calculator on a regular basis—and it’s more important now than ever, given recent changes to the tax law. If you need to adjust your withholding amount, you can give your employer new Form W-4.

Check on your financial foundations

It’s true that some things in your financial life require less attention than others, but you shouldn’t ignore your financial foundations altogether.

Take this opportunity to make sure your emergency fund is sufficient. Does it hold enough money to cover at least three to six months’ worth of living expenses? Perhaps your living expenses have increased recently, or you dipped into the fund and need to replenish it. Take a look and adjust accordingly.

When it comes to your investment portfolio, many experts recommend against checking it too frequently. Over-checking it can lead to knee-jerk emotional reactions and possibly hinder the performance of your investments. It’s important, however, to examine your portfolio a few times each year. Use your summer financial checkup to look at the components of your portfolio and make sure they’re still appropriate for your time horizon and risk tolerance. You can also examine any fees. A financial advisor can be a helpful resource for this element of the checkup.

You’ll also want to check on your flexible spending accounts (FSAs). In general, you must use the money in an FSA within the year. At the end of the year, you’ll likely lose any money left over in your FSA. Look at your FSA balances and think ahead to any eligible expenses that may be coming down the road, such as copayments, prescription medications and other health care costs. Make sure there is alignment between your spending plans and the amount of money you’re putting into your FSA.

Plan for upcoming expenses

Summer might feel like a strange time to be thinking about the holidays, but it’s a great opportunity to start planning for extra expenses. To reach a holiday savings target of $300, for example, it’s much easier to start now and set aside $50 a month than to wait until October and have to carve out $100 each month.

Get organized

Look for opportunities to make managing your finances easier and more efficient. Comb through your bills and see if you can enroll in automatic payment services. Summer is also a good time to sort through your financial paperwork, like tax returns, receipts and credit card statements. Identify which items can be discarded and which should be filed away.

Look at the interest rate on your savings account.

Interest rates in the US are rising. In an environment where interest rates are increasing, banks are able to charge more for loans, which means they collect more funds. As a result, banks are in a better position to offer higher interest rates on savings accounts and certificates of deposit (CDs) – which is great news for savers.

If you’re working to bolster your savings, every bit of interest can help. Today, a savings account may offer 1.70% annual interest. On a deposit of $5,000, you’d earn $85 in the first year. That’s considerably more than you would have earned in 2015, when interest rates on many savings accounts were closer to 0.80%, earning you just $40 on a $5,000 deposit.

Evaluate your debt repayment plan

If you have variable-rate debt, like credit card balances or a home equity line of credit (HELOC), rising interest rates will likely make it more expensive for you to repay your debt. Even if you only have fixed-rate debt, it’s still wise to include an evaluation of your debt repayment plan as part of your summer financial checkup.

If you’re having trouble keeping up with your payments or want to explore different ways to pay down your debt, take this opportunity to look into transferring your balance(s) to a credit card with a lower interest rate, or learn about consolidating your debt by taking out a personal loan.


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