Don’t ‘set and forget’ money goals, adviser says: 5 steps for a mid-year financial checkup

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With half of 2024 in the rearview mirror and the second half on the horizon, you may be able to give yourself a pat on the back for sticking to the financial goals you set at the start of the year or, perhaps, discovering that unfortunately it went off the road.

Either way, now is a good time to do a “financial audit.”

“If you set a goal, ‘just set it and forget it’ doesn’t work,” said certified financial planner Jaime Eckels, a wealth management partner at Plante Moran Financial Advisors in Auburn Hills, Michigan.

“You have to be responsible and you have to control,” she said. “It doesn’t have to be every two weeks. It doesn’t have to be every month, but a mid-year checkup is a perfect time to review everything.”

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Getting yourself a financial audit involves taking a holistic view of your finances, including cash flow and debt, savings and retirement accounts, as well as insurance coverage and estate planning.

Here are five steps to take:

Review your cash flow

Start by counting the money coming in and out of your bank and other financial accounts.

When reviewing your monthly expenses and savings, check if you have more money going into your bank accounts than going out. That’s how it should be, according to experts.

However, it is difficult for many Americans to cover all their daily or monthly expenses with their salary. Some have dipped into their savings or turned to credit cards to buy groceries. To avoid racking up debt, pay attention to the unit price of groceries to find the cheapest items. And if you can, use cash or a debit card at checkout to avoid going into debt for everyday expenses.

You may also need to call back for dining and other inexpensive purchases. Stick to next month’s needs and see if your cash flow improves.

Focus on high interest rates

High interest rates can be both a challenge and an opportunity.

“With rates near 20-year highs, it’s important to review any outstanding high-interest debt you may have such as credit cards or other types of loans and focus on paying off those balances first,” he said. Terry Rasmussen, president and CEO of Thrivent. a financial services provider based in Minneapolis.

Credit card holders with a checking account have an average interest rate of about 23%, according to Federal Reserve data. If you have a balance, reduce your credit utilization and work to pay down debt to reduce that burden. Making these moves can help improve your credit score and potentially lower the card rate you may qualify for in the future.

“On the savings side, higher interest rates mean that high-yield savings, money market accounts and CDs can grow more than usual,” Rasmussen said.

The average annual percentage yield, or APY, for a savings account is 0.58%, according to Bankrate, but high-yield savings accounts average around 4.88%.

Increase your emergency and retirement savings

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Ideally, you should have three to six months of living expenses saved in an emergency fund. If you’ve been dipping into that account to pay for car or home repairs or another unexpected expense, now’s the time to figure out how you can top up your savings or at least get back into a regular savings strategy.

“The nice thing is you’re getting 4.5% to 5% on your money right now” in many high-yield savings accounts, Eckels said. “So people should feel a little better about keeping cash on hand and keeping that cash in an emergency reserve.”

Make sure you’re contributing enough money to your 401(k) plan or workplace retirement plan to receive the company matching contribution. You don’t want to leave that free money on the table. The maximum employee contribution to a 401(k) plan this year is $500 more than in 2023 to $23,000, or $30,500 if you’re 50 or older. For those in a higher tax bracket, some experts suggest increasing pre-tax retirement contributions to lower taxable income.

If you don’t have a retirement plan at work, you can open a traditional or Roth IRA yourself through your bank or brokerage. The maximum IRA contribution for 2024 is $7,000, or $8,000 if you’re 50 or older. Again, this is $500 higher than last year.

Handle taxes early

It’s not too early to take some steps now to reduce your potential tax hit for the year. Use the withholding calculator on the IRS website to make sure you have the right amount of tax withheld from your paycheck.

“If you owe a lot in 2023, consider the increase in federal withholding by updating your Form W-4,” said David Peters, founder of Peters Financial in Richmond, Virginia. “This could prevent surprises next April.” Peters is a certified public accountant and a CFP.

And, if you’re self-employed or a part-time worker who receives income that doesn’t have taxes withheld, make sure you’re making adequate quarterly estimated tax payments. If you don’t pay enough estimated tax on your income or pay it late, you may have to pay a penalty even if the IRS owes you a refund.

Protect your assets

As you assess your financial well-being, consider not only your current money situation, but also how you can protect what you have.

Make sure your health, life and disability insurance coverage matches your current needs and circumstances. Also, double check the coverage limits on your home and auto insurance policies.

“Explore any discounts or packaging options that may be available from an insurer to optimize your insurance costs and benefits,” Rasmussen said.

The ultimate goal, she added, is to “ensure that your policies adequately protect your assets, provide sufficient liability coverage, and provide for your family if the unthinkable happens.”

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