Wednesday, June 29, 2022

It’s Time for a Mid-Year Financial Check-Up

It’s that time again…time for a mid-year financial check-up! We are almost at the halfway mark of 2022, which makes this a perfect time to assess your financial progress and take action over the next six months. 

Last year, I wrote a blog post about mid-year financial check-ups for the OneOp Personal Finance team. In it, I urged a review of tax deductions/credits, tax withholding, budgeting/cash flow, flexible spending accounts, financial goal progress, and investment portfolio status.

This post describes eight more areas of personal finance for a mid-year review:

¨    Expense Projection Analysis- Now is the time to “do the math” for expenses anticipated in late summer or fall. For example, an iPad or laptop computer, major appliance, car, or college tuition. “Math” can include calculating how much money needs to be saved to make the purchase by a certain date or calculating the monthly payment for a loan to buy the item using an online loan calculator. For the latter, create different scenarios by changing the loan amount, loan term, and interest rate. Compare the results. Create a savings or loan payoff plan based on the results of the math.


¨    Credit Report and Score Check- Mid-year is a great time to check your credit history if you have not already done so this year. Visit and request a free credit report from Equifax, Experian, and/or TransUnion. Americans are entitled to a free credit report every 12 months from each of these “big three” credit reporting agencies. Rather than request all three credit reports at once, many credit experts recommend requesting one report every four months so a recent report can be pulled more frequently.


¨    Investment Portfolio Rebalancing Review- To put it mildly, the stock market has been very volatile during the first half of 2022. This has undoubtedly changed the asset class weightings of numerous portfolios; i.e., the percentage weighing of stocks, bonds, cash-equivalents, real estate, etc. The objective of portfolio rebalancing is to get back to an investor’s target asset class weights (e.g., 50% stock, 30% bonds, and 20% cash assets). Rebalancing can be done by selling securities in an “over-weighted” class and/or depositing new money (savings) in an under-weighted class.


¨    Debt Repayment Progress- The best way to perform this check-up to compare the total balance on all of your consumer debts (e.g., car loan, student loans, credit cards) on 1/1/22 and today. Hopefully, the balances have gone down through the past six months of making monthly payments. To accelerate debt repayment during the remainder of 2022, consider doing a free PowerPay analysis that will create a personalized debt repayment calendar. When each debt is repaid, its former monthly payment is added to the monthly payment that is due to a remaining creditor.


¨    Savings Increase- Some people get mid-year raises or earn promotions on July 1 (e.g., college faculty promoted to a higher rank). This is a great time to increase emergency savings or automatic deposits into an employer retirement savings plan (e.g., 401(k) or 403(b) plan). Even 1% more of pay in increased savings can result in thousands of dollars more in later life, especially if that savings is matched by an employer. The best times to increase savings, so it doesn’t affect your cash flow, are when there is increased income or a household expense (e.g., child care, loan) ends.


¨    Insurance Check-Up- While stocks have trended downward so far in 2022, insurance premiums (homeowners, auto, health, etc.) have generally trended up. Among the culprits: climate change, higher costs for labor and supplies to repair houses and cars, and higher out-of-pocket costs for employer-provided health insurance. Now is a good time to explore money-saving strategies to reduce insurance costs. Start with a review of property insurance coverage with an insurance agent. Next, review employer health insurance options to be ready for open enrollment season in the fall.


¨    Automated Payments Review- Payments for utilities (e.g., cable, internet), streaming services, and other bills that many people pay through automatic payments have been rising. Therefore, now is a good time to review them and check to see if there are cheaper plans or substitute services. Start by asking your current service provider if payments can be reduced. You may find that less expensive payment plans are available or you are offered a “deal” to stay with a company and not leave. Consider dropping payments for products or services that are not used regularly.


¨    Financial “To Do” List Items- Many people have  a financial “to do list…things that they want to do when they “get around to it.” Mid-year is the time to get started on these items so they get done by year-end. Examples include preparing (or updating) a will, preparing net worth and cash flow statements, creating a digital asset inventory, calculating the savings needed for financial goals, comparing credit card offers, and making charitable contributions.


In summary, take time now to give yourself a mid-year financial check-up and act upon your financial "to do" list while there’s still time in 2022.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.



No comments:

Post a Comment

Looking Ahead to Your 2024 Tax Return

  With the 2023 tax filing deadline in the rear view mirror, now is a good time to look ahead to 2024 taxes that you will owe in April 2025....