Midyear is a great time to sit down and review where you are with your financial goals and objectives for the year. My spouse, Kay, and I try to do this on a quarterly basis, but the midyear review is the most important one.
In this podcast episode, I share 7 midyear midlife money moves for staying on track. These are the 7 areas I recommend reviewing so that you can have a better handle on how your year might shape up from a financial perspective, and also make any necessary adjustments.
7 Midyear Midlife Money Moves
#1)Review your financial goals for the year
Hopefully you were able to set some goals at the beginning of the year for your savings, investing, and spending. If not, it’s never too late to do so and just start from where you are now.
Or, better yet, consider working with a Certified Financial Planner who specializes in helping women midlife professionals develop a detailed financial plan. With an actual real financial plan, you can clearly define your financial goals and determine the specific financial actions you need to be taking throughout the year. You can also automate your savings so that you don’t even have to think about it!
#2)Review and catch-up on your retirement savings
Check to see what you’ve contributed so far this year toward your company retirement plan. Are you maxing out your plan? Are you taking advantage of any company match? You don’t want to leave money on the table. Midyear is a good time to ramp up your retirement savings if you can afford to. It will also help reduce your taxable income.
If you’re a business owner, you may be able to qualify for the Qualified Business Income tax deduction. However, you may be subject to income limitations. Establishing and/or contributing to a small business retirement plan could be a double win. You could get a tax break and put more money away for retirement simultaneously!
#3)Review your tax situation
What can you do between now and the end of the year to reduce your tax burden? Well, following step 2 above by default is going to help reduce your taxable income. But also, if you have a high deductible health insurance plan, you may be eligible for an HSA (Health Savings Account).
I love HSA’s because they offer a great way to sock away money for your health care costs later in life which will come out as tax free distributions. You can absolutely use the funds now for health care expenses now as well if you need to.
Also, if you think you might be close to being able to itemize on this year’s tax return (standard deduction for 2019 single filers is $12,000 and married filing jointly is $24,000), you might consider making charitable contributions or even making an extra mortgage payment or two to get over that standard deduction line.
#4)Check you withholding (if you’re a W2 employee)
When the tax laws changed in 2018, many people were hit by surprise because they owed the IRS at tax time. If this happened to you, it may be that you have not adjusted your paycheck withholding.
Review how much is being withheld currently from your paycheck. Ideally you don’t want to have to pay into the IRS but you also don’t want the IRS holding on to your money.
The IRS has a withholding calculator that you can use to determine how to best complete form W-4. Be sure to have a recent paystub handy.
#5)Review your health insurance and benefits status
Are you close to reaching your annual health insurance deductible? Even if you’re halfway there, it might make sense to get additional doctor’s appointments and/or procedures scheduled before the end of the year. That way, you won’t have to start all over with paying your deductible in January of next year.
Do you have a Flexible Spending Account with work? Those are “use it or lose it” funds so be sure to check your balance.
#6)Review your YTD spending
I’m not a big fan of traditional budgeting. I think it feels limiting and it’s very cumbersome to keep track of. Instead, I advocate for having some smart spending rules and reviewing your spending periodically.
What Kay and I do midyear is pull down a big picture view of our spending thus far for the year. We are not as concerned about the details as much as we are the major spending categories. If something looks out-of-whack, we talk about it. Are there places we can redirect more funds to retirement savings?
You may be surprised how much money is going out the door where you really don’t have much to show for it.
We also discuss spending plans for the remainder of the year. For example, if we have a big vacation planned, we talk about what would be a reasonable amount of money to spend on activities when we are actually on the trip.
Again, nothing too restrictive here, just some broad-based rules can help you become more prudent with your spending.
#7)Review your investment portfolio allocation
We’ve been in one of the longest running bull markets in history. As I write this, the DOW is once again hitting new highs. It’s possible the markets can go higher, but it’s also inevitable that we will see another correction as well as a recession.
It’s the ongoing volatility that makes investing in stocks worthwhile. You’re accepting greater short-term risk for long-term reward.
With that said, in times like these I tend to see a lot of portfolios that are overweight in stocks to the extent that it doesn’t make sense based on your risk comfort level and goals.
I’ve been through multiple bear markets and more corrections than I can count as a financial advisor for more than 20 years. Watching your portfolio go down can be painful, although a necessary of investing. But why take on more risk than you need to?
Midyear is a good time to review your portfolio’s allocation to make sure you have the right amount of stocks, bonds, and cash for your personal risk comfort level. The right allocation is the one that you can live with through the ups and downs.
Take the time to review your financial situation midyear so you’re not scrambling on all of this at year end!
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