5 Tips for a Personal Finance Audit Before Summer Ends

Welcome to August…the dead of summer. Vacations have largely come and gone, the heat index is in the triple digits for a large swath of the country, and you may be having a hard time mustering up the energy to do more than drape yourself across the air-conditioner.

Instead of not-so-patiently waiting for the days to cool off so you can dive into the fall smorgasbord of sweaters, fire pits, and pumpkin everything, we recommend using the waning days of summer to get your financial house in order before the hustle and bustle starts back up again.

Think of it as a DIY financial audit: examine your spending and savings habits, your financial goals, your investments and your budget, and figure out what you can tweak to stay on track or even get ahead in the final months of the year.

We’ve broken things down into a five-step DIY financial audit, with the help of Jennifer E. Meyers, a certified financial planner and president of SageVest Wealth Management in McLean, Virginia. Together, we’ll help put your finances in order before the leaves start falling.

1. Make a financial plan

The only way to work toward financial goals and know if you are on target to meet them, is to make a plan, Myers says. What are your long-term goals? What about your short-term goals? What is important to you? What will you need in the bank in five, ten, or 40 years?

“Without a plan, you’re basing your financial future on best guesses,” Myers says. “Most people don’t succeed by chance. They succeed through smart decisions, hard work, and perseverance.”

2. Evaluate your savings progress

Remember those New Year’s resolutions you set way back when 2019 was full of possibilities?  “Now’s the time to evaluate if you’re on target,” Myers says, “fast-pacing your goals or falling behind.”

The start of a new year is a great time to set savings objectives so you have a timeline as a measure of success. If you don’t have a savings goal already in place for this year, now is the time to set one and meet it by Dec. 31. Whether that means saving $50 per week for the rest of the year or transferring some cash into a higher-yield savings account, you still have time to make this year financially successful.

3. Check your investment portfolio

The slow, lazy days of August are a great time to delve into your portfolio and see if its keeping up. “Every portfolio requires monitoring relative to benchmarks and objectives to ensure you’re keeping up relative to your goals and the risks you’re assuming,” Myers says.

What should you be looking for? Myers says you need to invest according to your financial situation: Are you set up for long-term investment; are you comfortable with your level of risk after the summer’s volatile market; what short-term cash will you need?

“Beyond performance, it’s essential to know if you’re appropriately positioned in stocks versus bonds relative to your investment horizon, liquidity needs, risk tolerance and more,” she says.

4. Consider rebalancing

If you’ve been closely watching your investments, checking your statements, and reading the news, you’ve likely noticed that the markets had a great first half of the year.

It could be a smart move, Myers says, to set aside some time each year to rebalance your portfolio to ensure that it hasn’t become too risky for the second half of the year.

For example, she added, if your target investment mix is 70 percent stocks and 30 percent bonds, you might find that your stocks have grown in weighting due to stock performance earlier this year.

“It might be time to…trim stocks back to 70 percent, reallocating the excess to bonds,” she says. “Conversely, if the markets fall, and your stocks drop to a 67 percent portfolio weighting, it might be time to sell 3 percent from bonds and move into stocks.”

5. Account for personal changes

Take stock of anything new that’s happened since January, or anything that will change in the next few months. Are you getting married or divorced? Are you expecting a new baby? Have you gotten a promotion or a new job? Is your employer considering layoffs?

Any life event, big or small, could impact your financial decisions and savings goals. Moving in with a significant other, for example, could save you money in the long run if you are splitting household expenses and that could free up more money for savings or investment. Buying a house, on the other hand, will likely end up costing you more between closing costs, home improvements and moving expenses, meaning you may want to make changes to your short-term financial plan to account for those significant extras. That could be anything from putting money into a short-term CD or adding a couple hundred bucks each month to a savings account.

Myers is taking her own advice to heart. She cut back on spending this summer to afford a Disney vacation this fall, foregoing expensive summer camps for the kids and opting for low-cost activities like playdates at the park. (She and her family also skipped a vacation last summer to pad their savings for the Disney trip this year.) She said one of the best things to remember as you are doing your DIY audit is that savings is akin to a long-distance run that requires commitment and endurance versus a sprint.

“Setting monthly, seasonal and annual goals is the path to success,” she says.

Before the air cools down and the fleece gets hauled out of the closet, take one of these last few dog days of summer and see how you can improve your financial plan in the next few months.