2020 may not feel like it can end soon enough, but there several things you can do today to enter 2021 on the right foot. Last month, I wrote about restructuring your debt in a low-interest rate environment. The Fed reiterated their commitment to keep interest rates low until 2022 in their latest meeting in July, which gives us ample time to tackle our debt obligations and potentially save thousands of dollars in the process.
This month I’ll be writing about how to prepare an annual spending plan, plan out a home purchase, and weigh the pros and cons of a 15 vs. 30-year mortgage. With low interest rates, a strong market rebound, and a desire for more space, the real estate market is extremely hot right now. But jumping into a long-term commitment without factoring your larger financial picture can be detrimental. Too many households found themselves underwater during the financial crisis because they took on more than they could chew.
What makes or breaks someone’s financial future is their ability to utilize the range of financial tools they have available to them wisely. You can carry debt and manage large investments like a home with ease if you approach the process responsibly and methodically. Keep a cool head and don't let FOMO get the best of you.
August Financial Checklist
As we soak up the last dog days of summer, this month is a great time to begin planning for the next few months and the upcoming year. Here are a few items you can start reviewing to set yourself up for success.
1. Audit your debt obligations
With interest rates at all-time lows, there has never been a better time to revise or restructure your high-interest debt. Check out my latest post on “How to Restructure Your Debt in a Low-Interest Rate Environment” for more ideas on how to reduce your debt obligations.
2. Plan for upcoming liabilities
Low-interest rates can increase your purchasing power for larger purchases and investments. During the midst of the financial crisis in 2009, I bought my first car using a loan that offered 0% APR for the first three years and didn't pay a dime in interest by paying it off in that time frame. If you have been planning for a home, car, or asset that may require a loan, think about how you can leverage these rates to minimize your interest payments or get more bang for your buck.
3. Begin thoroughly tracking your expenses and cash flows
When it comes to creating a budget (or as I prefer to call it, a spending plan), you need to establish your baseline first. This month, I’ll be breaking down exactly what you need to gather in the coming months to develop a realistic spending plan for the upcoming year.
4. Revisit your investments
The market has seen a strong rebound since its lows in early March, but it should be no surprise that the US economy also experienced a sharp contraction in GDP (a broad measure of economic activity) this past quarter.
While some industries like tech may remain strong due to shifting demand and consumer behavior, it’s always good to keep a critical eye when things feel a little too comfy.
Many Millennials and young investors took to investment platforms like Robinhood and Etrade during the pandemic to leverage the market volatility. If you are still heavily weighted in any positions though and no longer feel a strong conviction towards these investments, it may be time to consider rebalancing or diversifying your portfolio.
Even if the market drops again, investing is still one of the best ways to grow your long-term net worth. To better protect your assets from any future financial downturns, consider using an automated investing platform. And if you’re looking for additional diversification such as real estate or agriculture, investment crowdfunding can be an attractive option.
5. Take a tour of my site!
I took a small hiatus this past month to redesign this site and make my content more accessible. If you’re looking for a place to get started with your finances, head over to my START HERE page for resources on how to jump-start your path to financial independence.
Here’s to finding our second wind in this next half of 2020 and creating a glimmer of anticipation in the year to come!