Can you believe we’re already more than halfway through 2023? It’s a fact, but just because the year is winding down, doesn’t mean you should wait any longer to ensure you’re in good financial shape. This means it’s time to do what could be a difficult task: Look at your spending, saving and investing behavior from January to now and consider where you went astray — and how you can get on a safer, healthier track with your finances.
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Kate Goesel, CFP with Schwab Intelligent Portfolios Premium, talked with GOBankingRates to explore the seven money mistakes people often make by this time of year.
Putting Off Saving for Retirement
Americans are in trouble when it comes to saving for retirement. Millions of older workers are approaching their golden years with nothing saved. If you skimped on saving for retirement this year, it’s understandable (especially given a hostile economy), but it’s a mistake you must fix ASAP. Fortunately, righting this wrong is entirely doable.
“If you haven’t yet signed up for a 401(k) plan through your employer or an individual retirement account (IRA) with automated monthly deposits, the middle of the year is a good time to make it happen,” Goesel said. “Setting up a 401(k) and/or an IRA allows you to avoid actively thinking about retirement savings while setting yourself up for the future. And starting early allows your earnings to generate more earnings, making it easier to grow your savings at an accelerated rate over time.”
Not Building an Emergency Fund
The importance of an emergency fund can not be overstated. Alas, many Americans are behind here, too. Most Americans would be unable to cover a $1,000 surprise expense. Again, it’s not really their fault, but they need to try and remedy this problem as it will only get more dire as the years go by and the chances of unexpected expenses increase.
“As you enter the second half of 2023, start building your emergency fund if you don’t have one yet,” Goesel said. “Aim to put aside three to six months’ worth of living expenses in a separate account to cover unforeseen expenses. Consider allocating part of your paycheck to a separate account to help you build your fund over time.”
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Selling Investments When Markets Swing
The stock market got off to a rocky start in 2023, but it has since stabilized somewhat. If you made any reflexive reactions to the market volatility in the first half of the year, you may have missed out on profits. You can repair this mistake.
“Investors who take the long view tend to do better,” Goesel said. “For the rest of 2023, try not [to] let day-to-day market fluctuations impact your long-term savings goals. If you have a track record of pulling funds from your portfolio following market events, consider looking at your account less frequently.”
Staying in Cash
Many Americans are stashing their earnings only in checking or savings accounts or, what’s worse, at home. Open your mind to making your cash work harder by investing some of it.
“If you are keeping most of your savings in cash due to concerns about stock market volatility or recession fears you will miss out on the long-term growth of the markets,” Goesel said. “The reality is that you can start building good investing habits at any point in the year, in any market environment. For the remainder of the year, try investing in stocks and move a portion of your cash savings into a diversified portfolio each month. Using this approach, also known as the ‘dollar cost averaging,’ will allow you to buy more shares when prices are low and prices are high.”
Dedicating Too Much to a Particular Asset
“The midpoint of the year is a great time to take a look at your investment portfolio and make sure you don’t have all your eggs all in one basket,” Goesel said. “It’s important to recognize the benefits of owning different types of assets and adding variety to your portfolio, especially during volatile market environments. Make it a goal to check on your portfolio every few months to ensure it’s diversified with investments across numerous asset classes, sectors, industries and geographical areas.”
Letting Your Budget Get Away From You — Especially During the Summer
It’s been a scorching summer with record-breaking temperatures and, related to the global heatwave crisis or not, Americans have been hungry for travel. Unfortunately, this can lead to indulgent spending you may not be able to truly afford. The same goes for summer parties that, though tons of fun, may pose a risk to your financial health.
“Travel plans, parties, and other outdoor activities add up and can throw off your budget. It’s easy to spend more unintentionally when you’re out more and off your normal routine or schedule,” Goesel said. “Assess your budget to see if you’ve gotten off track. An easy remedy is to set aside a certain amount for the ‘spendier’ months so you have that wiggle room. An emergency account can be reserved for this purpose, but you certainly want to keep the bulk of it intact in case a large, unexpected expense occurs.”
Going It Alone
Money can be perceived as a deeply personal topic, but really it shouldn’t be. Not only is it wise for us to engage in fruitful dialogue about our financial lives, but we should also be proactive and enlist the guidance of finance professionals if we want to make the best choices and implement the best strategies.
“A lot of people are confident and happy to manage their own investments, but some struggle,” Goesel said. “Use the midpoint of the year as an inflection point to check in with yourself on whether you could use some professional assistance to make the goals you set at the beginning of the year a reality.Working with an advisor can help put you on the path to reaching your savings goals.”
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