We all know that the calendar year ends in December but for many of us the end of summer marks a much more poignant transition.
As kids the cooling weather brought a mix of dread and delight. Dread at the idea of trading luxuriously-long and, if we were lucky, lazy days of sunshine for exams and homework. Delight at the thought of crisp-empty notebooks, perhaps of a perfect first day of school ensemble and most of all the chance to improve on the previous year. This new beginning is so powerful that even years out of school many people still think about September as the true start of the year.
Karen Carr, a 26 year-old financial planner at the Society of Grownups, a Boston meeting space where young people are encouraged to work on their money, even has 20-something clients who still talk about "going out on school nights.” She explains, “A lot of us have the mentality that summer is a relaxing time and fall is when you get back in gear. It isn’t a bad thing. Relish in what you had for the summer but kick start really good financial habits going forward.”
Labor Day, the unofficial end of summer, is five weeks away. As you enjoy what’s left of the season a few simple steps can put you on track for a stellar financial year.
Track your spending. Summer can get expensive. We use the warm weather and quiet offices as excuses to get away. Extra hours of daylight make it the perfect season for happy hour or dining al fresco (Carr quips that she eats out more because it is too hot to turn on her oven). Plus for many people in their 20s and 30s summer is better known as wedding season and attending a wedding, let alone hosting one, is notoriously pricey.
By the time it is all over you bank account may need a vacation of its own. First, check your bank account and credit card balances. Then use a digital spending tracker such as Level, Mint or LearnVest to get a handle on where your money is going and if you are spending more than you can afford. If you find you’ve been overspending cut back so the damage doesn’t compound further. If you are spending less than you make put more money toward savings goals.
No matter how much you make now, it never hurts to make a few extra bucks. From freelancing to participating in the sharing economy, this simple guide will show you how.
Boost your retirement savings. Spending is typically top of mind post-holiday season splurges. Tax season runs through the rest of winter. Insurance enrollment typically happens in the fall. But poor retirement doesn’t have a season of its own. When your golden years are decades away it can be difficult to motivate to give long term savings the attention it deserves. But experts say you’ll need to put 12% to 15% of your pay toward retirement annually in order cover your expenses after paychecks cease. Get there by using the end of summer to give retirement its due and boost your 401(k) or IRA contribution by 1%.
Stephany Kirkpatrick, head of financial advice at LearnVest, recommends adding 1% every three to six months until you reach your personal target. “Those little changes really help with your ability. It makes it much easier to have a tiny bit more going toward retirement without making a major change, while still making a ton of progress.”
Ask for a raise. Or at least prepare to. I probably don’t need to tell you that, typically, the right time to ask for a raise is about one year after your last one, or about one year after starting a new job. If you were lucky enough to start working shortly after college graduation that right time may be quickly approaching. It should be equally obvious that asking for a bump in pay is rarely an easy conversation and is therefore one you should prepare for by arming yourself with facts about your performance and all the self-confidence you can muster. Unfortunately lots of people go about it all wrong or not at all. For tips on asking read:
- “A Quick Trick For Getting A Big Raise”
- “How to Negotiate a Year-End Raise”
- “Script: How To Ask For A Raise”
- “The 10 Biggest Mistakes People Make When Requesting A Raise”
(By the way, post-raise is another perfect time to add to your retirement savings.)
Evaluate your housing situation. Most Americans move between May and September, which makes sense when you consider that families with children want to be in house before the start of school and recent grads are likely to start lease cycles within a few months of graduating in May or June. These days, with fewer young people buying homes, this rent cycle can last through many years and apartments. If this sounds like you and your landlord has not sent a renewal you should get one soon.
In either case take time to consider how much more rent you can afford. If you are just starting out you can use the popular rule of thumb that no more than 30% of your take home pay should go toward housing. For people already paying rent Carr recommends a more holistic approach: evaluate how you spend around your current rent. Include savings and debt payments. Then consider how your budget would need to change if you spent 2% more, 5% more, 10%. Be realistic. It’s easy to say you won’t eat out for a year, but hard to do. This exercise will help you make an unemotional decision about moving if your rent goes up (be sure to factor in the cost of the move itself).
If you’re among the 26% of Millennials living with parents and thinking you’d like to strike out on your own consider starting to look now when you have a good shot of finding a roommate. This will lower the cost burden in most cities.
Check in with your student loans. If you graduated with student debt in May you’ll have to start paying back your loans in just over three months. That's when your six month grace period ends. Don’t panic, but also don’t expect your loan issuers to hold your hand as you get started. If you’ve spent any of the last few months looking for a job or an apartment you’ve probably already learned the real world doesn’t work that way.
As my colleague Maggie McGrath wrote, “Not only is it better to know what you owe and to what’s coming down the pike, but there’s always a chance that some lender doesn’t have your current address. The fact that you didn’t get a notice doesn’t relieve you from the obligation to start paying back.” Read her post, “5 Things You Need To Do With Your Student Loans Right Now,” for helpful tips on how to get started. If you’re a few years out, remember to periodically check on the progress you’ve made and determine if you can contribute more each month to pay down the debt faster.
Start planning for next summer. If you overspent this summer don’t expect next year to be less expensive. Instead prepare in advance. Expect to travel next year? Use travel booking websites to get an estimate of how much flights, lodging and transportation to and from the airport will run you. Then decide on a daily budget to cover food, fun and getting around. Keep in mind that in a new locale you might not be able --or inclined -- to hunt down deals. Once you have that total add 20%, suggest Kirkpatrick, then, to determine how much you’ll have to save each month, divide by 12.
If you come up with a number that is not going to fit into your budget you’ll need to reevaluate. “It’s a really good exercise to stop and think, ‘How can I build a plan to do some travel, if that is important to me, without offsetting the other financial goals I am working on?’” says Kirkpatrick. “By having a game plan you can, number one, build up your savings, which makes that season a lot easier. And number two; get some perspective so you don’t fall into the trap of emotional spending.”
