5 Item Checklist for Your Personal Finance Mid-Year Checkup
It’s that time of year again, for your personal finance mid-year checkup. Financial progress is a long-term endeavor. Every day, month, and year you make decisions that affect your financial goals and financial security. It’s time to dive deep into your finances and see how much progress you’re really making, while you still have time to make adjustments for the year.
1) Retirement Preparation
Do a quick assessment on how well you’re preparing for retirement. You should have a mix of the appropriate retirement investment vehicles, such as a 401(k) or equivalent employer account, IRA, and SEP (for the self-employed). Retirement investing accounts allow you to save on taxes as you prepare your nest egg.
Be clear on how much you will need in retirement and work towards accumulating that golden number. Use a retirement calculator. Here is a good one. Consider if your monthly expenses will go up or down and by how much. Revise your budget to account for expenses you will add and the ones you will let go. This will give you a good estimate of your future monthly expenses. Also consider how long you will need to live off your nest egg and the number of years until you plan to retire. If you’re not putting enough money towards retirement, how can you increase this number?
2) Savings Goals Progress
How much are you saving a month? Work your way towards saving 20% of your income. This is the money you will use to complete your emergency fund, save for large purchases and invest. A complete emergency fund is 6-8 month worth of bills. If you have a lot of consumer debt that you need to pay down, then save at least $1,000 in your emergency fund before you concentrate on paying down bills.
If you’ve fallen off the wagon with saving, now is the time to get back on track. The end of the year is usually heavy with extra expenses in the form of travel, gifts, and holiday expenses. Start prepping now. Automate your savings contribution if you have not done so already. Set it up like a bill with your bank. Also try using programs that help you get savings when you shop online. Create a visual reminder as to why you should save money. Something like a phone screensaver or picture that you can rubber band to your card. They can go with you and act as a reminder in the moment.
3) Budget Review
Take the time to go back through your budget line item by line item. Does it still make sense? Life happens. Analyze if you’ve stuck to your budget categories. Determine which budget categories need to be increased and which should be decreased. Include an annual budget not just a monthly budget. This will allow you to plan for extra expenses coming up in later months. Whether you have a trip planned, holiday travel and other expenses, events etc. Plan for those expenses now.
Also, determine where you can free up money to put more money towards your wealth building vehicles and paying down debt. Consider which categories can be released completely. Also think about how you can increase your income and what you would do with the money. Can you start or grow a side hustle? Is it time for a raise at work?
4) Debt Analysis
Are you making great headway with eliminating your debt? Create and follow a debt reduction strategy. Plan out how you will tackle and pay off all your debt. Start with the smaller amounts and list your debts. Aggressively target one at a time.
Check your credit score. Making payments on time to pay down your debt will result in an increase in your credit score. It won’t be overnight, but it will happen. Paying down debt isn’t a fun and exciting process. It’s simply making the plan and following it through until you reach your goal: conquer the debt.
5) Tax Preparation
Taxes talk already?! Yep, it’s not too early to start making sure you decrease your tax burden. Take a look at your planned charitable contributions. Decide when and how much you will increase those contributions. Go through the closets, basement, attic and anywhere else you may have stashed away things you don’t really use anymore. Either sell them or donate them. If you donate them then make sure to get a receipt that acknowledges the monetary value of your donation. You can help others while helping yourself.
If you have a side hustle or are building a business, then make sure you are aware of the dates to pay your estimated income taxes. If you don’t pay taxes on the revenue earned throughout the year then you may face a hefty fine when you do file taxes. Keep more of your money by paying throughout the year.
