With summer in full swing and the year halfway over, many are looking to reassess their financial progress. Liz Miller, certified financial planner and founder of Summit Place Financial Advisors, joined TheStreet to offer insights on how to refocus your financial goals for a strong finish to the year.
Transcript:
CONWAY GITTENS: Liz Miller, certified financial planner and founder of Summit Place Financial Advisors. Welcome to the street. So we brought you here today for our mid-year financial checkup. So let’s start first with the plan.If you don’t have a concrete financial plan for the year, how do you create one and what needs to go in it.
LIZ MILLER: So everyone should have a plan. We say no matter what, how do if you’re on track for whatever you’re trying to achieve. If you don’t have a plan of some kind, it’s great to work with an advisor who can help you build a plan, but there’s a lot of steps you can take yourself. So we say the very first step is an inventory, and that means make a list as tedious as that sounds of your checking accounts, your credit card balances, everything you have take in or owe and write it all down. And you’d be surprised how good it feels just to even see that in front of you. And that gives you that starting point to say, OK, here’s what’s coming in the door. Here’s what needs to go out the door, here’s my bucket of any savings or assets I have. And then here’s what I’m going to have to pay out. And it starts making it very clear where you’re going to start that planning.
CONWAY GITTENS: And so if someone wants to create a budget, what is your advice for an easy plan that they can stick to?
LIZ MILLER: That’s so great. I can tell you as a professional, I have a million of these detailed spreadsheets that someone thinks you’re going to hand to a client and say, write down for the next six months how much you’re going to spend. And there are a few people who love that, but most people can’t stick to that. What we say is a great starting point is to remember the 50, 30, 20 rule. See that money that’s coming in that we talked about, 50% of that should go to your essentials. Now, if you live in New York City like we do, that might be a little higher because housing costs are so high here. So if you’re in a major city, don’t worry if it goes a little higher than that, particularly when you’re starting out.
But 50% should be your rent or your mortgage and those fixed payments that you can’t do anything about, then 30% should be the things you choose to spend money on. How many streaming services do you want every month. Maybe you need to cut back on one or two, right. Going out with friends. What does weekly brunch cost. That’s your 30% All those ones where you’re making choices do I go out this weekend or do I buy new clothes. And then 20% should be your target to be putting aside every month for savings. And some of that may be paying down debt, but some of it definitely should be funding your first account that we call an emergency fund where you’re building enough money that should anything happen unexpected, you’ve got some money put aside for those emergencies.
CONWAY GITTENS: So we’re halfway through the year. What tweaks should people be making now?
LIZ MILLER: So the big tweak now is to see where have you been. Maybe your resolution in January was to get better control of your spending, but it was just too overwhelming. And you tried sort of keeping track of anything and nothing happened. So this is the time to see, am I spending a whole lot more than 30% on those choices. That’s the bucket I always say to start with mid-year, how much are you spending on the things you have control over. And when you list them out, can you make some proactive decisions. I know someone who was a Starbucks addict and what they did was decide get that Keurig at home and they went to Starbucks once a week and the other days off to work, they took a mug with them of their own coffee. Well my gosh, that started it was like $100 over a month. It now got to go into savings. So little things that you really can live with. But when you make like anything like a workout goal, if it’s too big a goal, it’s not going to work. You really have to look, well, where am I spending all these things and what ones can I actually make a change to.
CONWAY GITTENS: So we’re in the heat of summer. Maybe people have already taken summer vacation, gone to family reunions. Maybe they’ve spent too much on their hotel bill or airfare. Maybe they had too many piña coladas at the pool. So what is your financial emergency repair plan?
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