During periods of economic duress — such as the period we’re now experiencing — the midpoint of the year is an excellent opportunity to take a step back, review goals and strategies and make any necessary adjustments to ensure you can get on track, or stay on track to achieving your long-term goals. The problem is that most people are so consumed with current economic realities they don’t pay attention to their personal financial situation. Many ignore that the clock is ticking on their personal ambitions, which could be getting further out of reach. Taking a day at midyear to conduct a personal financial checkup can alleviate some stress.
Here are three simple steps you can take to ensure you’re financially on track.
Review your goals
It’s not unusual for people to go years without reviewing their financial goals. They may be long-term, so it’s easy to let them recede into the background. Now is the time to bring them to the forefront to see if you are on track to achieving them.
- What are your most important financial goals?
- Have they changed, or have you reprioritized them?
- Have you updated the costs to achieve them?
- Where are you financially in relation to your goals? Are you on track?
- Has anything come up, such as a new expense, which may affect your timeline?
Review your financials
Just as business owners should review their businesses at midyear, so should you review your personal financials, including your financial statement and budget.
In your financial statement, look to see where you are with your assets and liabilities.
- Has there been an improvement?
- Are you where you expected to be halfway through the year?
- Are you increasing your liabilities? For example, do you have new credit card debt?
- If you have had substantial losses in your investments, should you consider rebalancing your portfolio?
- If you have incurred any losses, should you consider doing some tax-loss harvesting to offset capital gains this year?
- Does your investment portfolio still reflect your risk profile?
- Have conditions in the market changed to the extent you might want to adjust your portfolio?
You should discuss these questions with your financial advisor at your next meeting.
For your budget:
- Are you on track with your spending plan?
- Are there any new expenses that need to be incorporated into your plan?
- Are you spending or saving more than expected?
- How will that impact your cash flow for the rest of the year?
- What adjustments can be made to help you meet your annual savings goal?
- Can you find the savings to add to your retirement plan contributions?
Review your tax situation
After just filing your taxes, you may not be anxious to spend more time with them. However, it’s the ideal opportunity to ensure you’re taking full advantage of the options available to you to confirm you’re on target with your estimated tax payments.
- Did you adjust your withholdings based on your recent tax filing?
- Do you expect your taxes to increase or decrease based on your projected year-end earnings?
- Do you expect any changes to your exemptions? For example, a new birth or a child aging out?
Now would be an excellent time to meet with your accountant to identify opportunities to reduce taxes before the end of the year, while avoiding possible underpayment penalties.
The advantage of checking in with your personal finances at the midyear point is it can keep any necessary adjustments to a minimum. At the very least, it should allow you to clear your mind of any personal stress as you muscle through the current economic malaise.
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