8-Step Summer Financial Checkup
It seems that when summertime hits, time slows down. The hustle and bustle of the holiday season is over, the taxes are complete and the vacation days are scheduled. If you find yourself with a bit of extra time on your hands in the upcoming months, you may want to use this opportunity to check in on your family’s finances. While doing a thorough analysis of your wealth may sound intimidating, we’ve broken it down into 8 simple steps to keep you focused and on-track.
Step 1: Analyze Your Budget
In 2018, approximately 36% of Americans were breaking even with their spending, while 19% were spending more than they were making.1 An effective way to avoid spending more than you’re earning is to step back and take stock of your monthly and annual budget. And if you don’t have a budget at all, use this time to make one.
Many credit cards or banks will offer categorical breakdowns of your spending, which can be a great way to find out what you’re spending the most money on and if there’s room to cut back. To get the best look at your spending habits, you may want to evaluate your savings and spending record over the past six to 12 months.
Step 2: Seek Out Tax Savings
Do you scramble to pull your paperwork together every March and April? This year, try taking a different approach to tax season by evaluating your tax-saving strategies early. You may want to work with a financial planner or tax professional to create a mock tax return, as this can help you understand your withholding options and tax-saving opportunities such as 401(k) or 403(b) options, IRAs and HSA contributions
Focus on filing any time-sensitive deductions and brush up on changes in tax laws. Reaching out to your tax professional now could mean you have more time to prepare and strategize together for next year’s returns.
Step 3: Tackle Your Debt
An alarming one-fifth of adults roll over $2,500 in credit card debt each month.2 If you’re guilty of putting off managing your mounting expenses, now’s the time to start planning to pay them off. While most consumers have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll likely want to focus on managing and eliminating.
While you could be tempted to simply pay off what shows up on the bills each month, you may want to create a debt summary to get a better idea of your total debt’s big picture. By creating an annual debt summary, you can better understand whether you’re gradually working down the amount or falling further into the hole.
Step 4: Revisit Short and Long-Term Goals
A lot can change in a year - marriage, death, divorce, growing your family and experiencing a major career change. Even seemingly small adjustments, like a job promotion or sending a kid off to college, can have a significant impact on your financial status. That’s why it’s important to regularly review your long-term goals and progress towards them while revisiting and evaluating your shorter term goals as well. Working with a fee-only financial planner can help keep you on track to meet your goals.
Step 5: Evaluate Coverage and Providers
As you’re reviewing your budget and expenses, take the extra time to thoroughly evaluate your current providers and coverage options. This includes your internet, cable and wireless service providers in addition to your insurance coverage options. If you tend to set up autopayments and forget about your monthly bills, this could be an opportune time to revisit what it is you’re actually paying for.
Step 6: Reassess and Rebalance Your Portfolio
It’s important to visit your portfolio and risk tolerance regularly to help keep it in line with your tolerance, goals and market conditions. While most managed portfolios will be rebalanced automatically, it’s important to take stock of your investments’ big picture. Doing so can help you determine if you need to diversify differently or reassess your risk tolerance.
Step 7: Review Your Retirement Savings
Whether retirement is decades down the line or within the upcoming year, reviewing your retirement savings on an annual basis is a great habit to start. Take the time to assess whether or not you’re maxing out your retirement contribution options and how the savings you’re making today will translate into retirement income later down the line.
Step 8: Assess Your Estate Plan
It’s not fun to plan for the worst case scenario, but leaving your family with an outdated will, trust or estate plan can lead to some major issues down the line. As you assess your legacy plan annually, make sure you’re accounting for any newly acquired assets (houses, cars, pets, etc.), while checking that your current beneficiary designations reflect your most recent wishes. This can be especially important after any major life change such as marriage, divorce, or the birth of a child.
While you’re likely daydreaming of book reading, beach going and backyard barbecuing this summer, don’t forget to do yourself a favor and squeeze in some financial assessing as well. Performing your own financial checkup annually gives you time to prepare for tax season, budget for the upcoming holiday season and acquire peace of mind knowing your family’s finances are aligned with your future goals and current needs.
1http://www.usfinancialcapability.org/downloads/NFCS_2018_Report_Natl_Findings
2https://www.nfcc.org/clientimpact/2017-financial-literacy-survey
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.