Reviewing Your Finances Mid-Year
You made it through tax season and now you're looking forward to your summer vacation. But before you go, take some time to review your finances. Mid-year is an ideal time to do so, because the demands on your time may be fewer, and the planning
opportunities greater, than if you wait until the end of the year.
Think about your priorities
What are your priorities? Here are some questions that may help you identify the
financial issues you want to address within the next few months.
- Are any life-changing events coming up soon, such as
marriage, the birth of a child, retirement, or a career change?
- Will your income or expenses substantially increase or
decrease this year?
- Have you managed to save as much as you expected this year?
- Are you comfortable with the amount of debt that you have?
- Are you concerned about the performance of your investment
- Do you have any other specific needs or concerns that you would
like to address?
Take another look at your taxes
Completing a mid-year estimate of your tax liability
may reveal tax planning opportunities. You can use last year's tax return as a
basis, then make any anticipated adjustments to your income and deductions for
You'll want to check your withholding, especially if you owed
taxes when you filed your most recent income tax return or you received a
large refund. Doing that now, rather than waiting until the end of the year,
may help you avoid a big tax bill or having too much of your money tied up
with Uncle Sam. If necessary, adjust the amount of federal or state income tax
withheld from your paycheck by filing a new Form W-4 with your employer.
To help avoid
missed tax-saving opportunities for the year, one basic thing you can do right now is to set up a system for saving
receipts and other tax-related documents. This can be as simple as dedicating
a folder in your file cabinet to this year's tax return so that you can keep
track of important paperwork.
Reconsider your retirement plan
If you're working and you received a pay increase this
year, don't overlook the opportunity to increase your retirement plan
contributions by asking your employer to set aside a higher percentage of your
salary. In 2015, you may be able to contribute up to $18,000 to your workplace
retirement plan ($24,000 if you're age 50 or older).
If you're already retired, take another look at your
retirement income needs and whether your current investments and distribution
strategy will continue to provide enough income.
Review your investments
Have you recently reviewed your portfolio to make sure that
your asset allocation is still in line with your financial goals, time horizon,
and tolerance for risk? Though it's common to rebalance a portfolio at the end
of the year, you
may need to rebalance more frequently if the market is volatile.
Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.
Identify your insurance needs
Do you know exactly how much life and disability insurance
coverage you have? Are you familiar with the terms of your homeowners, renters,
and auto insurance policies? If not, it's time to add your insurance policies to
your summer reading list. Insurance needs frequently change, and it's possible
that your coverage hasn't kept pace with your income or family circumstances.