As crazy as it may sound, we are more than halfway through 2022. Now is a great time to give yourself a financial check-up and reevaluate any goals you made in January. Just like a car, your financial plan and budget require regular maintenance to run properly. Personal and economic conditions change over time, meaning the goals you made months ago may need some adjusting. Everything from inflation to your marital status can have significant implications on your finances, so it’s wise to set aside some time to reflect and strategize throughout the year. You may want to ask yourself how and why these goals were made, and if you are on track to accomplish them by years end.
Here are six items to consider reviewing during your midyear check-in:
1. Budget Review
When you set your budget back in January, you probably did not consider that inflation would be as high as it is now. The significant cost increases for many day-to-day purchases may require some budgetary revisions. If you are concerned about how much money you are spending, consider limiting unnecessary expenses, such as by curbing eating out or trimming subscription services that you rarely use. Most importantly, balance your budget and spending to fit your lifestyle in a responsible fashion. Making these slight adjustments allow you to course correct your spending, which can make all the difference with inflation rising.
2. Tackle Your Debt
Inflation is not the only thing that has increased substantially this year. Interest rates have skyrocketed, making paying off debt an even greater burden. If any of your debts have variable interest rates, you’ll likely stand to benefit by paying them off as soon as possible. One strategy, known as the avalanche method, involves paying off your debt with the highest interest rate first, then moving on to the next highest, and so on. This tactic can help you save money in the long run by shortening how long you pay higher interest rates.
3. Tax Assessment
When was the last time you checked on the tax withholding rates on your paychecks? Confirming you have the correct rates in place can help reduce your tax burden and limit your tax consequences. This is especially relevant for those who may have recently changed jobs or have gotten married.
4. Check Retirement Accounts
It’s common for people to not regularly monitor their retirement accounts, especially 401(k)s. You may want to check-in on your relevant retirement accounts to ensure you’re capitalizing on their services. First, check to see if you’re taking advantage of an employer contribution match and, second, check your accounts’ investment strategy to confirm it’s suitable for your retirement horizons.
5. Emergency Fund
COVID-19 lockdowns caused many to tap into their emergency fund. These savings act as a safety net for families in the case of a surprise expense, such as for medical bills, car maintenance, home repairs, etc. The general rule of thumb is to have three-to-six months’ worth of living expenses readily available should an emergency occur. Consider putting a specific amount of money into a savings account each month. Even small contributions that feel insignificant now can help this fund provide stability and a financial cushion for you and your loved ones in times of need.
6. Future Expenditures
While it may only be August, planning for major anticipated purchases is still a smart idea. The holiday season often sneaks up on us, so take this opportunity to prepare and plan now. Consider the timing of travel and large gift purchases to help make a financial plan for you and your family. Making goals now may ease some of the stress that comes with the holidays and family gatherings, allowing you the space to better relax and enjoy the festivities.
With summer coming to an end, it is also time to start thinking about school expenses. This is especially notable for parents sending their kids off to college. Besides tuition, there are many other miscellaneous expenses (i.e., laptops, books, activity fees, dorm room amenities, and more) that can catch you off guard if you do not prepare accordingly.
Thus far, 2022 has been an expensive year, which makes a reevaluation of your financial goals even more necessary than before. By performing a midyear financial check-up, you can assess your progress and make changes to improve your financial outlook. From budgets to taxes, small adjustments can keep your personal finances on track. Taking the time to strategize for the remainder of 2022 can keep you and your family prepared and protected.