Conducting a mid-year financial review is a valuable exercise to ensure financial stability and progress toward your goals. Here’s a look at some key aspects to consider during your mid-year financial tune-up:
1. Double-check Your Cash Flow Projections
- Actual vs. Budgeted: Compare your actual income and expenses with your budget. Identify categories where you’ve overspent or underspent.
- Adjustments: Modify your budget to reflect any changes in your lifestyle or financial situation. This could include changes in income, new expenses, or the elimination of previous costs.
- Tracking: Use financial software or apps to track your cash flow regularly, ensuring you stay on top of your finances.
2. Evaluate Retirement Contributions and Savings
- Review Contributions: Check if you are meeting your retirement savings goals. Maximize contributions to your 401(k), IRA, or other retirement accounts.
- Adjust Contributions: Increase your contributions, if possible, especially if you’ve had a positive change in your financial situation, such as a raise or bonus.
- Catch-up Contributions: If you’re 50 or older, consider making catch-up contributions to your retirement accounts.
3. Run a Projection of Your Income Taxes
- Withholding Check: Ensure your tax withholding aligns with your projected tax liability. Use the IRS withholding calculator if needed. [Tax Withholding Estimator – About You | Internal Revenue Service (irs.gov)]
- Estimated Payments: If you pay estimated taxes, review your payments to avoid underpayment penalties.
- Life Changes: Consider any significant life changes that could impact on your tax situation, such as marriage, a new job, or the birth of a child.
4. Review Investment Performance and Asset Allocation
- Performance Review: Assess the performance of your investments compared to benchmarks. Identify any underperforming assets.
- Rebalancing: Rebalance your portfolio to maintain your desired asset allocation. This helps manage risk and ensures alignment with your investment strategy.
- Diversification: Ensure your portfolio is well-diversified to minimize risk.
5. Assess Debt and Credit Management
- Debt Levels: Review your debt balances, interest rates, and repayment terms. Focus on paying down high-interest debt first.
- Credit Report: Obtain a free credit report and review it for errors. Correct any discrepancies to maintain a healthy credit score. Annual Credit Report.com – Home Page
- Debt Reduction Strategy: Consider consolidating or refinancing debt to take advantage of lower interest rates.
6. Update Your Financial Goals and Budget
- SMART Goals: Revisit and update your financial goals to ensure they remain Specific, Measurable, Achievable, Relevant, and Time-bound.
- Budget Adjustment: Reflect any changes in your income, expenses, or priorities in your budget.
- Emergency Fund: Ensure your emergency fund is adequately funded to cover 3-6 months of living expenses.
7. Plan for Major Life Events
- Anticipate Changes: Plan for significant events such as marriage, starting a family, buying a home, or career changes.
- Financial Impact: Assess how these events will affect your finances and adjust your plan accordingly.
- Insurance Coverage: Review your insurance policies to ensure adequate coverage for life, health, disability, and property.
By conducting a thorough mid-year financial review, you can make informed decisions, adjust your strategy, and stay on track toward achieving your financial goals. If you need assistance, Asti Financial Management can help by providing personalized advice, helping you navigate complex financial decisions.