Mid-Year Financial Tune-up: A Checklist for Gen Z
The dog days of summer are upon us, and it’s a perfect time to shift our attention from beach days, concerts, and vegan BBQ to a different kind of adventure: your lifelong financial journey. Whether you’re just starting to dip your toes into the stock market or have been investing for a while, a financial checkup can help you stay on track and make good decisions with your money. We’ll dive into some key areas for your financial wellness, such as budgeting, saving, and managing debt, while staying true to your values and making a positive impact on the world.
1. Identify your goals:
The first step of investing is to think about what you’re investing for. After all, you don’t get into your EV without knowing your destination, right? The same goes for investing. Consider your goals across different timeframes: short-term (1-3 years), medium-term (3-5 years), and long-term (5 years+). Start by reflecting on your aspirations, whether it’s buying your first home, having the financial freedom to spend more time volunteering, or starting a non-profit in the future. Write down your goals and create smaller, measurable milestones, such as a savings target each month. Having clear objectives will keep you motivated and focused on your savings journey.
2. Evaluate your financial situation:
Before you build a house, you have to set the foundation. The first building block is creating a monthly budget; check to see what comes in each month and what goes out. Ideally, you’ll have some money leftover each month to save towards your goals. If you don’t, take a closer look at your expenses to see if there are areas you are willing to adjust. You’ll likely find more flexibility in your variable expenses, things like concert tickets, going out to eat, and travel - those additional savings can go a long way. You may want to align your budget with your values by allocating funds for environmentally friendly products, fair-trade goods, and companies with strong ESG practices. You may want to consider prioritizing sustainable living choices that fit into your spending plan.
3. Be wary of debt:
It’s no secret that interest rates have risen over the past year. When was the last time you checked the rate on your borrowing? According to Forbes Advisor, the current average credit card interest rate is a staggering 24.52%. Like a snowball rolling down a hill, interest charges on your credit cards have the ability to grow and compound if you don’t pay off the balance each month. This can make a serious dent in your ability to save. If you have multiple credit cards, consider first paying off the balances of the cards with the highest interest rate. When it comes to banking and credit, consider using environmentally friendly and socially responsible banks and credit unions such as Amalgamated Bank or Clean Energy Credit Union. You may want to choose green banking options that support renewable energy projects and contribute to a greener economy. By working with the right bank, you can support companies that are involved with divestment from fossil fuels and benefit community development projects.
4. Set up an emergency fund:
We’ve all experienced a time where an unexpected expense arises. Whether it’s a plumbing issue in your home, a job loss, or an unforeseen medical emergency, having quick access to cash can be critical during uncertain times. Maintaining a rainy-day fund is always a good idea. This way, when the unexpected arises, you won’t find yourself dipping into your savings or taking out unwanted debt. Most financial experts typically recommend keeping aside three to six months’ worth of expenses in an emergency fund. This money should be in a safe and easy-to-access place like a savings account or money market. Check the interest rates on savings accounts at your local community bank to ensure you’re maximizing the interest you earn. Often times, you’ll find rates at local banks and credit unions offer higher interest than what you’ll find at the big banks.
5. Supercharge your retirement savings:
Who doesn’t love the idea of ‘free money’? According to the Plan Sponsor Council of America, 98% of 401(k) plans make contributions to employee’s retirement savings. This contribution, or “match,” is money your employer adds to your own contributions. For example, your company might match dollar for dollar up to 4% of your earnings, which means if you contribute 4% of your salary, your employer will add an extra 4% to your account. These additional savings can bolster your retirement funds. For self-employed individuals or business owners, consider setting up a retirement plan such as a SIMPLE IRA, SEP IRA, or Solo 401(k). You may want to consider exploring your employer’s plan to see if they offer ESG investment options. As an investor, every dollar you shift towards ESG oriented companies is a vote for a sustainable and ethical future.
6. Invest according to your values:
You have the choice of where you invest your money. Companies use your investment dollars to run and grow their businesses. Before you buy a stock or bond, you may want to consider companies that prioritize environmental sustainability, social responsibility, and good corporate governance practices. Try to avoid companies involved in industries that conflict with your principles. The world of values-driven investing is constantly evolving, with more and more companies being held accountable for their actions. Stay informed and educate yourself on emerging trends, new investment opportunities, and evolving ESG standards. You’ve worked hard for your money – you should feel good about the companies you invest in.