This Summer, Straighten Up That 401(k)

It's summer and a lot of people are thinking about vacations and barbecues. But what about your 401(k)? Many financial experts say July is a perfect time to review your yearly financial goals. Host Michel Martin speaks with Money Coach Alvin Hall about how to refocus your financial priorities.

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MICHEL MARTIN, HOST:

This is TELL ME MORE from NPR News. I'm Michel Martin. Coming up, the Isley Brothers scored a smash hit in 1959 with "Shout." More than 50 years later, though, Ron Isley is still going strong. He joins us to talk about his solo career and some of the bumps in that long road to becoming an R&B legend. That's in just a few minutes.

First though, we want to turn matters of personal finance. By now, we hope you are settled in your summer routine of spending times outdoors, crashing a barbecue or two, taking every chance you get to find something cool to sip on. But when you're jumping in that pool or enjoying that island vacation, our money coach says, don't forget about your checkbook. A lot of experts say July is a very good time to check up on your finances and make sure you're in good standing for the rest of the year. Here to tell us more about that, once again, is our money coach Alvin Hall. Welcome back, Alvin.

ALVIN HALL: I'm glad to be back from my lounging about on the beach.

MARTIN: Well, I know - I'm sure people are saying, no, please, no. It's not December. It's not tax time. Why? Why do I have to think about this now?

HALL: Because you're at a perfect point. You can look back to see what you've done good with your money and badly with your money over the past six months, and you can look forward and try to make any corrective measures as well as improve on what you do well.

So this is the perfect point that people, while sitting on the beach or on holiday someplace, just take a little time to think about their money.

MARTIN: What exactly should you be thinking about? Do you have a checklist of, like, the top three or five things that you - it would be good to do right now?

HALL: Absolutely, savings. Look at your savings to make sure you're still on target to hit the number that you established in January. This is really important because that is the money that will help you have an emergency fund if you need it, as well as build toward your retirement. Look at how much you've been earning on that money, because the growth of that money must be factored in to what you think it will be by the end of the year.

This is important because rather than drifting forward with your money, it's better to have targets along the way. Third, if you're in debt, look at how well you're achieving your paydown patterns. Do you want to pay down your debt very quickly, and if you're doing that, are you hitting the numbers along the way? As I always tell everybody, man cannot live by bread alone. So there are treats that you should give yourself.

If you're living on a restricted budget, think about your treats in advance, and are you achieving the things you promised yourself you would in order to be able to buy that treat for yourself. So part of this is looking at your savings, if you have debt, looking at your debt, and then looking at the things you want to treat yourself throughout the year rather than just going out and going wild at those recent sales.

MARTIN: Speaking of treats, this is the time of year when many people really look forward to going on vacation. I think, in fact, you'll hear a lot of people say, I need to go on vacation. But that can be a very difficult time, I would think, to rein it in or to stay on a budget. Do you have some tips for that?

HALL: Yes, when we're on holidays - and I am guilty of this, too - you think, oh, I'm just having such a great time, right? This glass of rose tastes so good, I'm going to buy myself something, and you don't have a budget for it. Before you go on a holiday, sit down and determine how much you can afford to spend every day.

It's easy, when you're on holiday, if you have that one number in your mind each day. And one of the fun things you can do is you can have one of your kids, if you have children, keep track of the spend and make it a little contest for them. So whoever keeps tracks the best get a prize at the very end.

The next thing is to know what you want your treats to be when your on holiday. Every year I go on holiday for about two weeks, and many years ago I decided that I would buy myself a pair of swimming trunks. That's all I ever buy when I'm on holiday, and this is sort of ironic, Michel, because, guess what...

MARTIN: You don't swim.

HALL: ...I don't swim.

(LAUGHTER)

HALL: I don't swim at all, but I always think it's good to have a nice pair of swim shorts when you're sitting beside the pool, whether you're walking along the beach, it's always nice to look chic. And then, the third point is to know your financial priorities that will await you when you come home.

So if you know you have to buy clothing for the kids - we all know that Halloween is coming up and then Thanksgiving and then Christmas, right? Start planning for those things or thinking about those priorities now so you don't overspend during the holidays. It's good to carry that one number in your mind every day because it's easy to recall.

MARTIN: You know, you say that now is also a good time to look at or think about how you are feeling.

HALL: Yes.

MARTIN: Talk about that.

HALL: Yes, I think this time of year, you look back and decide, you know, am I happy with the way things are going, am I pleased with the financial decisions and other decisions I've been making with my life? I think this is a good time to think about that, because then you have the rest of the year to bring more happiness in your life. If you think, oh, things have been too restrictive, I've been too restrictive to myself, that means you need to change your priorities.

You may not be able to spend more money, but by simply changing your priorities - the way you think about your money, the way you allocate your money - you can bring happiness to your life without increasing the spend. That's what I mean. So this is a good time to think about that.

MARTIN: Have you ever redirected yourself in that way?

HALL: Absolutely. Two things I think about often in my own history was, there was a period during the summer when my income was always very, very low, and although I wanted to go on holidays, I couldn't always do it. So what I decided was, what things can I do locally, what things can I do for free or that cost a little bit in my own community that were adventurous, that introduced me to something new, that made life seem like a brand new adventure to me? And it took me a while, but today people have something that I didn't have during the period when I was doing this.

They have the Internet. So in every city, there are free concerts, there are all these things you can do that will bring greater happiness to your life. And the other thing I did, Michel, was, when the summer sales came around, I would decide I could only buy one thing. But I would shop to look for that one thing that made me really, really happy, that would have resonance for me throughout the year. Every time I put it on, I'd feel that sense of joy. So you can find that without increasing the spend. And this is a good time of year to assess your happiness.

MARTIN: What's that one thing, very briefly?

HALL: What's the one thing I bought?

MARTIN: What was this year's thing? Yeah, what was it?

HALL: Oh, this year's thing. Oh, it was actually a piece of kitchenware. I've always wanted this little espresso maker, and so it went on sale this summer and I decided now that it's on sale, I can really get it. And I had been looking at it for almost nine months, but I wouldn't let myself 'cause I have a perfectly good coffeemaker in my kitchen. But I always wanted this, and I know that every day I use it, when I have my little espresso in the morning, it will give me a great deal of happiness.

MARTIN: OK, well, enjoy that espresso for us. We appreciate it. Alvin Hall is one of our regular contributors on matters of personal finance and the economy. He was with us from our Bureau in New York. Thank you, Alvin.

HALL: You're welcome.

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