By: Charlestien Harris
We are now halfway through 2022, which is the perfect time to do a mid-year financial checkup. Review what progress you’ve made since the beginning of the year, and make plans for the rest of the year to reach your goals.
Without regular maintenance, financial plans can fall apart. Just like a car needs regular maintenance, your budget or financial plan warrants a review on a regular basis to assess your needs or to make any necessary changes. A mid-year financial checkup is an opportunity to review the progress you have made toward goals you set at the start of the year and to make plans for the remainder of the year. Just like a calendar is a tool we use to help organize our days, the financial plan helps us to organize our finances.
Events that happen in life such as a death in the family, a marriage, the birth of a child or grandchild, or a job change can trigger tax and financial implications that need to be addressed before the year has ended. The world and life circumstances change constantly, therefore you may need to consider glancing through this checklist of items to review at the mid-year mark.
- Evaluate your budget. A budget is a very important part of your financial plan. As I mentioned above, there are some major life changes that can change the course of action you take now versus when you started your budget at the beginning of the year. That is why reviewing your budget regularly is so important.
- Plug the leaks in your budget. Once the review is complete, you may have discovered some “spending leaks” that need to be plugged. You should devise a plan that will take care of those leaks as soon as possible so you can stay on track with the financial goals you set for yourself and your family.
- Boost retirement contributions. Most people are not financially prepared for retirement. Also, inflation plays a huge role in how far our money will take us when we decide to retire. Check your retirement plan balances to make sure you are still on track to be able to leave your career when you planned. If you need to make additional deposits into the retirement account, you can still do so.
- Take stock of your college savings and student loans. If you have children or grandchildren and plan to pay for their college education, now is a great time to make sure you are saving enough to cover those types of expenses. Also, it is a great time to check on your student loan account status. Student loan forgiveness is a hot topic right now, and new rules and guidelines have been issued. Check with your loan servicer to find out where you stand. You can also go to www.studentaid.gov to get the latest updates.
- Manage and prioritize debts. This is also a great time to take a look at how much debt you have accumulated, or to decide which debts need attention or which ones are falling behind. Managing debt can affect your credit score, and you want to stay on top of any changes that may occur with your finances at any time. Debts owed makes up 30% of your credit score.
- Inspect your credit report. Your credit report is an essential part of your financial picture, and your score can affect your ability to successfully get approved for a loan, mortgage, or vehicle purchase. Knowing what information is contained on your report is key to your financial success. I recommend checking your report at least three times a year – January, July, and December. This habit can prevent “surprises” that you may not know about that can prevent you from getting approved for a loan or making large purchases. You can get a free copy of your credit report at www.annualcreditreport.com.
- Check on your taxes. During tax season, I see a number of clients who owe taxes at the end of the year – either because they did not have enough taxes taken out of their paycheck, or they did not have any taxes taken out at all. The IRS W-4 form is used to determine how much tax should be withheld from your paycheck. If you have not completed one recently and you have changed jobs or you have gotten a raise or are recently married, you should probably take a second or third look at the exemptions on your W-4.
- Update your estate plan. This is one area of finances that is often overlooked because most people think they don’t have enough assets to create an estate plan. If you want to ensure there is a smooth transition of assets to family members, or you want your last wishes concerning your health preferences executed, then having an estate plan is essential. Estate planning can entail documents such as a will, guardianship directives for those with minor children, an advanced healthcare directive, and powers of attorney.
Giving yourself a self-check financial exam can be key when assessing your financial health. It is also a good idea to seek help from a HUD-Certified Housing Counselor if you are not sure where to begin. Southern Bancorp has four HUD-certified counselors on staff to assist you with setting financial goals, reviewing your credit report, assessing housing needs, and other financial areas. If you need additional information on this and other financial topics, please feel free to email me at Charlestien.harris@southernpartners.org, or call me at 662-624-5776.
Until next week – stay financially fit!