The doctor is in: Time for a mid-year financial checkup
Summer will soon be over and the year is half done – it’s time for a mid-year financial checkup. You should take the time to assess your finances and make sure you’re ready for the rest of the year. Doing so at this juncture can give you time to make the corrections that could salvage your financial standing.
First of all, take a look at your spending. Compare your cash flow for the first six months. Did you allocate enough to cover expenses or are you falling behind in certain areas? If you skipped setting up a budget to begin with, remember that solid financial planning begins with having a budget. There are plenty of tools to help you get started. Check your bank’s Web site, or look to see if your smart phone has an application that can help you track your spending. Good, old-fashioned paper and pencil work, too. The key is to put a plan into place and stick to it.
Second, look at how much you are saving. Just a small amount of savings can play an important role in your overall financial picture. You should be saving for both long- and short-term goals.
Consumers have been paying down their debt, and banks have been writing much of it off. But there’s still plenty of debt piled up. Carrying high debt loads can have a big impact on your credit score, make monthly budgeting more difficult and leave you more vulnerable in an emergency. If you are only paying the minimum on credit cards or are, worse yet, skipping payments, you could be headed for trouble. The first step toward resolving these problems is to stop using plastic and chart a plan for paying off your cards. Seek help if you can’t do it alone.
The area of taxes is uncertain still, because Congress has not yet addressed a number of expired tax laws. Anything can happen before the end of the year. Tax rates are expected to go up for all but the lowest income brackets in 2011. You may want to get tax advice before converting a traditional individual retirement account to a Roth IRA. Those conversions are intended to reduce taxes when it’s time to withdraw the funds, but the uncertainty of the tax laws and individual circumstances means switching may not be the best move for everyone.
One of the biggest blunders most people make is not putting enough money into a 401(k) plan to meet the match provided by their employers. The flip side is putting so much in that you reach the maximum allowable too early in the year and miss out on company matching for the remaining months. A review of your retirement plan starts with your 401(k) but doesn’t end there. It’s important to go through the process of looking at all your retirement avenues, including Social Security and company pensions, and figure out how much you will need to provide for yourself and your loved ones. It’s much easier if you ask an expert for advice.
The goal is simple: make sure you’re on track. Be honest about where you are, and if you don’t already have clear, concise goals, both immediate and long-term, it’s time to set them.