We’ve reached the midpoint of the year. Are you halfway through your financial New Year’s resolutions?
Some of us might think we are, but quick checks can prove we have some work ahead of us to meet financial goals by January.
Follow these steps for a thorough midyear financial checkup:
1. Review your goals
Your money should always be working toward something. If you set a financial goal at the beginning of the year, now is the time to check your progress.
For example, if your goal was adding $1,800 to your savings account this year, you should already have socked away $900. If you’re not there, make a plan to catch up.
If you don’t have a goal yet, it is not too late to make one. Besides adding to savings, other goals might include:
Once you have a goal, start tracking it. A pencil — with eraser — and paper may do, but online tools are available, too. For example, software like YNAB (short for “You Need A Budget”) can help you achieve your financial goals by monitoring your spending and setting budgets.
2. Check on your investments
Pull recent statements and check your investments. Do you have a good mix of stocks, bonds and cash savings? What’s up — or down?
The right mix depends on your age, investment goals and risk tolerance.
Money Talks News founder Stacy Johnson offers a rule of thumb that starts with subtracting your age from 100. Use the result as the percentage of your savings that you should invest in stocks. The rest is the percentage you should invest in bonds and cash.
He continues in “Ask Stacy: How Can I Know I’ll Have Enough to Retire?“:
“So if you’re 20, you’d have 80 percent in stocks, and 10 percent each in cash and bonds. If you’re 80, you’d have 20 percent in stocks, and 40 percent each in cash and bonds.”
Speaking of your cash savings, remember to check on your savings account, too. Are you getting the best interest rate? You can compare rates in the savings section of Money Talks News’ Solutions Center.
3. Check on your retirement plan
If an employer-sponsored 401(k) plan is available to you, make sure you’re enrolled and contributing enough to get the full match. If you’re not, ask the human resources department how to bump up your investment.
If you don’t have a 401(k) plan, or simply want to save more for retirement, consider an individual retirement account (IRA). We break them down in “Confused by Retirement Accounts? Roth, Regular IRAs and 401(k)s Made Simple.”
4. Update your tax withholding
The IRS has urged everyone who earns income to check their withholding in the wake of federal tax reform. You can do this using the IRS’ new withholding calculator.
Under the new tax code, your income tax rate stands to drop starting this year, boosting your take-home pay. That means you may need to change your withholding accordingly. Any taxpayer who withholds too little of their income for federal taxes generally risks incurring a larger tax bill than expected, and possibly a penalty for not paying taxes when due, next spring.
If an adjustment appears to be in order, ask your employer for a new W-4 form and fill it out to change your withholding.
5. Pull your credit history
Visit AnnualCreditReport.com, get a free copy of your credit reports and do a midyear checkup on your credit history. There are a lot of ways to improve your credit score, but it all starts with getting a free credit report and looking it over.
Always check your credit reports for errors. If you find any, dispute them with the credit reporting agencies. For help with this, see:
6. Check on your FSA
Do a quick review of your flexible spending account (FSA), if you have one. Find out how much you’ve contributed this year, and tally up how much you’ve spent so far.
Since we’re six months into the year, you should be halfway through your FSA account balance by now. If you’re not, make a plan to get through that money by the end of your health insurance plan year. Your grace period or carry-over options are limited.
7. Track your recent spending
I may be alone in this, but I’m at my financial best at the beginning of the year. After New Year’s Eve, I’ve made my money resolutions and am watching every dime I spend.
A few months into the year, I start to slip. I’ve forgotten all the plans I made — and I’m back to old habits.
To get focused, I track my expenses for 30 days around June or July. I track every dime I spend — including cash purchases — by category. Then, I go through and see where my “money leaks” are.
Last year, I was dining out a lot. I was $130 over my restaurant budget one month. But once I saw it in black and white, I stopped overspending and plugged the leak.
Again, using software like YNAB can automate the process of tracking your expenses. It need not be tedious. Tracking expenses also makes it easier to create an accurate budget.
8. Update your budget
If you created a budget at the beginning of the year, it may need some fine-tuning. For example, I realized I overestimated my monthly grocery bills by about $75. Now that I know, I can reallocate that $75 to my savings goals.
After tracking your spending, add up the categories and compare them to your budget. Adjust your budget for any overages and put that money to better use — such as padding your savings or paying down debt.
So how is your money doing? Are you on track to make your financial goals this year? Let us know why by commenting below or on our Facebook page.
Jim Gold contributed to this article.
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