Reviewing your savings progress halfway through the year is crucial for correcting your course and gearing your budget towards joy-based spending.
A chance to track your progress
Since beach weather is right around the corner, I recently pulled out some bathing suits from the back of my closet to see how well I’ve been sticking to January’s diet and fitness resolutions, and which areas need improvement, in time for my summer vacation.
Rifling through receipts and credit card bills can be just as sobering an experience, but a mid-year financial check-in is crucial for tracking your savings progress. It also gives you an opportunity to gear your spending towards maximizing joy in your life. Consider these three simple steps:
Step #1 – How much have you put into your workplace plan so far this year?
Are you contributing what you resolved to at the beginning of the year? In an ideal world, you should be maxing out your workplace retirement plan and an IRA. Remember, the annual contribution limit for 2016 is $18,000 for a 401(k) or 403(b) ($24,000 if you are 50 or older) and $5,500 for an IRA ($6,500 if you’re 50 or older). Assuming you perform your review at the end of June, calculate how much you have contributed so far, at this six-month point; are you halfway towards those $18,000 and $5,500 targets? If not, that should be your first wake-up call that you’re not saving enough. By how much are you falling short? Write down the dollar amount. As with that beach body, now is the time to see if you’re off track.
Step #2 – Cut your expenses—without subtracting any joy
Next, you need to figure out where that additional retirement savings money is going to come from. Review your spending habits from the past six months by going through your bank account and credit card statements. If those statements are online, print them out and grab a highlighter. Go through your purchases and highlight the ones that didn’t give you a joyful experience. Utility bills will obviously be the first ones you mark off, as will the proverbial gym membership that never gets used. Obviously, utility bills can’t be canceled entirely like a gym subscription can. However, you can shop around for lower-cost providers. Next, you may find yourself highlighting expenses that were supposed to bring you joy, but didn’t. Such as that dinner in a pricey restaurant you didn’t really enjoy, or a “must-have” item that went out of fashion before you brought it home from the store. This enjoyment-based review of the past six months will steer you towards joy-based spending in the months ahead.
Step #3 – Reallocate the money you saved
This is the fun part. At the end of next month, estimate how much you saved and divert that money to any shortfalls in your retirement accounts. Following these simple steps last year, I cancelled my cable subscription and used those savings to pay for a yoga class. As a result, I’m healthier and happier. The focus on joy-based spending has also increased my appreciation of inexpensive pleasures: As a coffee house junkie, I achieve two hours of novel-reading joy for the price of a latte.
A mid-year check-in is less of a chore when you apply the “joy metric,” helping you get your savings back on track—and even to rethink what matters most in your life.