Why do you need a midyear financial checkup?
Review your accounts to help spot potential problems and make money-saving tweaks if needed.
If you review your finances only at the end of the year or at tax time, you could be missing out on opportunities to save or potentially grow your money.
"Conducting multiple reviews throughout the year is important," says Donald Hammond, CFP, executive vice president of Maritime Financial Group in Sheboygan, WI. "Doing a review in the summer gives you a chance to make adjustments if you have to."
Things to review midyear or as significant events occur include:
- Retirement. Make sure you're on track to maximize your contributions this year. At a minimum, consider increasing your contributions to qualify for your organization's full match, if available. You also may be able to take advantage of the catch-up contribution feature if you're over age 50. If your employer's plan allows this feature, you can contribute an additional $5,500 to the retirement plan.* And use our retirement calculator to find out if you're on track with your retirement goals.
- Budget. Midyear can be a great time to fine-tune your budget. If you've received a raise, or if you incurred additional debt, make adjustments to balance your spending and saving.
- Savings. Make sure you have enough set aside for a financial emergency. Typically, those in the industry suggest having three to six months' household income in emergency savings. Also see if you're on track to meet your other savings goals, such as retirement, funding a child's education, planning a family vacation or making home improvements.
- Credit. The Fair Credit Reporting Act allows you to request a free credit report from each of the three credit reporting companies each year. Hammond recommends spacing your three credit reports throughout the year for an ongoing credit snapshot that could help you spot potential problems. "Look for a few things: unusual activity, debt taken out in your name or incorrect information," he says.
- Insurance. Consider events that have the potential to affect your insurance needs. Did you have a child? You may want to protect your family with life insurance. Will your household soon add another driver? Be sure you're covered, especially if the new driver is a teen.
- Taxes. Review your tax withholdings, and bring them in line to reflect life changes such as marriage, divorce or the birth of a child. "Determine whether you've withheld enough not to get penalized at the end of the year," Hammond says. Calculate your tax withholdings with this tool from the Internal Revenue Service. Also, project your taxable income for the year — particularly if you're getting close to a higher tax bracket. If you think you might have to pay more in taxes next April, take steps now to reduce your taxable income.
- Investments. Analyze your portfolio's performance. Hammond points out that midyear is a good time to review and to adjust asset allocations if you're uncomfortable with your current risk level or if your retirement time horizon has changed.
See how you're doing
Keep your savings strategy on track with the help of our interactive retirement planning tool.
Want to work with a financial professional for your midyear check up? A financial professional can help you assess your current financial situation, set realistic goals and create a financial strategy.
* Catch-up contributions to the plan, if allowed, can be made once you've met the lesser of the plan's or IRS contribution limit of deferring $17,500 as indexed for the 2013 calendar year.