Broker Check

Best Practices for a Mid-Year Check on your Money

July 12, 2018

Based on my experience, it seems that most people get motivated to set their financial planning goals and practices at two otherwise busy times: the holiday/New Year season, and tax time in April. In my practice, our mission is to help our clients to use their money to have the lives they want. So while it may make sense to set financial goals at the top of the year, or when you are looking at where all your money went as you complete your taxes, summer is a good time to take a mid-year review of your finances to figure out if your money is helping you to have the life you want.


Here are a few items to consider:


Emergency Funds: Do you have enough in savings to protect you against life’s normal mishaps? A January Bankrate survey reported that only 39% of Americans have enough in savings to cover a $1,000 emergency. For those without enough in savings, emergency expenses tend to wind up on credit cards, creating debt. We consider building emergency funds as the first step for our clients to build their financial plans.  


Debt: Speaking of debt, are you using debt to your advantage? There are smart ways to use debt, and then there is debt that will hold back your progress. Most importantly, you need to have a plan to eliminate your debt, even if the plan is “pay off the mortgage in 30 years.” Debt is a challenge at any stage of life - starting out, building wealth, or in retirement. Just remember that your debt is your debt, so if you take it on, you will have to pay it off.


Spending: Debt and spending go hand in hand - if we can’t afford it now, we borrow (from a bank, a car dealer, or a credit card), to have it now. Check your spending for the past six months. Are there places you can cut back that won’t affect your quality of life? For almost all of my clients, the quick answer is “eating out.” Take some time to review your credit card and bank account statements. Do you find expenses that were unnecessary? If so, think about that as you make your way through the rest of 2018. Conversely, if you had an expensive but great experience - like splurging for a once in a lifetime family trip - then enjoy it, knowing that cutting back on some other expenses can make the memorable experiences possible.


Retirement: If you are still building your wealth, check to make sure that your retirement plan is still on track for your retirement goals. If you have an employer that offers a company match, make sure that you are contributing enough to get the full match. If you still have room in your budget, consider increasing your contribution by a reasonable amount, such as 1%, each year until you are making the maximum contribution of $18,500 (under 50), or $24,500 (over 50).


Insurance: The point of insurance is to help you get through life’s unexpected catastrophes, without creating a corresponding financial catastrophe. While automobile and home insurance is fairly common and easy for consumers to understand risk and pricing ($xxx of coverage will cost $xxx in annual premiums), the insurance that we analyze for our clients - life, disability, health, long-term care - tends to be murkier for many consumers. The questions here are simple: Do you see a risk? Do you want to insure against it? If so, how much risk do you want to insure? The answers to these questions are obviously the difficult part, but if you start with these questions, you will begin to understand whether you need these types of insurance coverage.


Enjoy the slower pace though the summer, but do take some time to consider whether you are using your money to have the life you want, and spend the rest of the year confidently knowing you’re on the right track.


This material is intended for informational purposes only and is not intended to be a substitute for specific individualized planning advice.