How to Give Yourself a Midyear Financial Checkup
Posted on 21st Sep 2021
Without regular maintenance, financial plans tend to fall apart.
Relief benefits are changing, market conditions are evolving and plans made six months ago might not make much sense today if any major life events have since occurred. Enter the midyear financial checkup.
A midyear financial checkup is an opportunity to review the progress you've made toward goals set at the start of the year and make plans for the remaining months of the year. It's an organizational tool as well as a chance for individuals and families to reflect and adapt as needed.
Life events such as a death in the family, a marriage, the birth of a child or grandchild or a job change can trigger tax and financial implications that need to be addressed before the year's up. As both world and life circumstances change, consider running through this checklist of items to review at the midyear mark.
Evaluate your budget.
Plug the leaks in your budget.
Boost retirement contributions.
Review your FSA and HSA.
Take stock of your college savings and student loans.
Manage and prioritize debts.
Inspect your credit report.
Tidy up your taxes.
Update your estate plan.
Evaluate Your Budget
Those without a budget should start their midyear financial checkup by creating one. Those with an existing budget can review which areas came in under budget and which exceeded planned expenditures, as well as how any income changes may affect their budget going forward.
A strong budget includes a plan to create or maintain an emergency fund – particularly in the wake of a year that left many facing sudden job loss and financial uncertainties resulting from the coronavirus pandemic.
"Life can be full of surprises, and a cash reserve provides a critical safety net for unexpected turns. Use your mid-year financial check-up for a closer look at your emergency fund and determine whether you’re on the right track or should consider boosting this cash cushion – especially if you found yourself dipping into it this past year," Marcos Rosenberg, head of Marcus Deposits & Marcus Invest at Marcus by Goldman Sachs, wrote in an email.
This fund should cover essential living expenses for three to six months, but the more you can save, the better, Rosenberg says.
Plug the Leaks in Your Budget
If during this budget review you uncover any unnecessary expenses, like excessive shopping, unnecessary subscriptions or other recurring fees, now is the time to eliminate them.
"Review your budget to understand your essential living expenses, and look for opportunities to reduce your financial risk, such as paying off credit card debt or eliminate or reduce lifestyle expenses that may be hard to maintain in a cash crunch (e.g., memberships/subscriptions, shopping habits, dining out, etc.)," Chad Rixse, director of financial planning and wealth CFO at Forefront Wealth Partners in Texas, wrote in an email. "The goal is to be prepared for anything."
This might include canceling a streaming service that is rarely used or closing a bank account you're no longer using but for which you're still paying maintenance fees. To finish the year strong, this is an opportunity to cut the fat out of the year's budget.
By: Emma Kerr