As we’ve just passed the halfway mark of the year, you potentially are thinking about the end of summer and starting to make fall plans. Or, potentially you’re already thinking about holiday plans and are thinking about with whom and where you’ll spend them. My point being, I think as we’re entering into the second half of 2023, it could be a good time now to pause and do a little financial checkup before we blink and it’s December! Here are a few things I’m reviewing / thinking of doing this August to ensure my finances are in a good spot:

If you don’t have a high yield savings account, open one

A savings account is a common type of a bank account alongside a checking account. In theory you will use your checking for daily / weekly types of frequent transactions; ie your paychecks coming in and spending going out. Hopefully you’ve got some money left at the end of the month and you can move that money into a savings account where it’ll earn interest. Then over time that savings account will grow!

If your money is just sitting there, it might as well earn all the interest it can, right? It’s also important to note that a savings account is FDIC approved insured, meaning the government and your bank guarantees you won’t lose that money. If you put it in the stock market you have a chance of earning more but you’ll take on risk and potentially could lose some (in a worst case, all) of your money. But, a savings account is money you aren’t risking, so it might as well work as hard as it can for you, right?

I did a quick scan of the major US banks (Chase, Bank of America, Wells Fargo etc), and none of their savings accounts are paying above 1%…in fact most we’re paying 0.1%. That might have be acceptable a few years ago when interest rates were super low but that low interest rate world is gone! 

A high yield savings account is most often an online bank…ie one without local branches and because they don’t have expenses that come with physical locations and overhead they can and pay better interest rates. They are not a trick or a gimmick. I’ve had several for years now and they’re a regular bank like my local bank except if I need money I just transfer it electronically to my local bank. A savings account shouldn’t be something you touch all that often anyways. 

Capital One is currently paying 4.3%, American Express and Ally Bank are paying 4%, and Marcus is paying 4.15%. What’s great to is I’ve found these banks to be proactive about raising rates and for a while there monthly I was getting emails saying ‘Good News – your rate has increased!’

With your local bank if you had $1,000, a year later you’d have $1,001. With a high yield savings account, you’d have $1,041. I could be wrong but that feels like a no brained to keep my money where it’ll (safely, no extra fees or gimmicks) work harder for me. 

Image credit Unsplash

Review your tax liabilities

No one enjoys paying taxes, myself included. What I like less than paying taxes is doing my taxes and getting a notice that I owe a lot more than I had planned for. There’s not an easy way to figure out how much you’ll owe until you do your taxes…or at least not one that I’ve found. With all your income (including paychecks, dividends, interest, proceeds from sales of stocks etc), and all your deductions it’s a lot! But, what I can do is do some quick mental math and figure out about what my income was last year and about how much I’d withheld (can do this by looking at that W2 tax form and/or your tax summary document). If there are adjustments needed, now might be a good time to increase/decrease your allowances on your tax form at work. Or, you can make a note of this and proactively mark some money in a savings account for use when tax time comes. 

For me, I had a larger than expected tax bill last year and I would prefer to not have that this year. I also sold some stock last month that I owned as we needed to purchase a new vehicle. So, I would expect to owe some more taxes this year, so to be proactive I’ve set aside some money already. I do think I’ll adjust my withholdings at work to pull a little more out for taxes. There is an argument that I could instead put that extra money in a savings account where I could earn 4% for the rest of the 6 months this year…but idk I just really did not enjoy that surprise tax bill and would rather be proactive if I could!

Take some time during your summer to review your personal finances!

Review your investments 

I’ve talked about a benchmark number that I use – 8% as my rule of thumb. This is the historical average return of the stock market over the last 100 years or so. I use this to review my own financial investments. If I’m doing more, I feel good. If I’m doing less, I ask myself am I being safe or a little too safe with my money? I do think it’s ok for me to earn less if I’m purposefully diversifying my money…I don’t think it’s good to have all your money in one basket or one type of basket and so I’m ok with less of a return in one basket as long as my other baskets are doing well. 

The Vanguard Total Stock Market is one of my go to investment favorites. It basically tries to buy most of the major stocks in the market and only charges a super low fee – 0.03%. It’s where I keep a lot of my investment money. I normally check $VTI as my gauge and for this year, so far it’s grown 19%. Not all of my investments have grown 19%, which will make me ask myself is it worth keeping that money in those investments where I could have just as easily had it in $VTI? No easy answer but good food for thought! 

Review any unneeded subscriptions 

We live in a world full of subscriptions, it seems that every company now is offering some sort of a monthly subscription model and they want you to sign up. As such, I have a lot of monthly subscriptions in my life and I’m sure you do too. I also imagine that you might be looking to ‘tighten the purse strings’ a bit. This economy has been a rocky one this year, with layoffs, inflation and overall angst being all around us. It could be a good time to review your monthly budget for expenses! 

Hopefully there’s an easy ‘pause’ feature that you could do, or most subscriptions I feel like are easy to cancel and then re-sign up for. Can you consolidate certain subscriptions, or potentially do without? A friend of mine realized they were paying for Hulu, ESPN+ and Disney+ all separately and realized the bundle would save him money. It’s little things like that that we should all be thinking of! In my opinion it’s much easier to cut expenses vs make more money! 

Summary

Summer is the halfway point through the year and a great time to do a little financial checkup of your personal finances. These shouldn’t take too much time and can hopefully help you course correct and make the end of the year much better!