As the needs of individuals and families change, financial plans tend to fall apart — unless you maintain them. Life events such as a death, a marriage, the birth of a child or a job change, for example, can trigger tax and financial implications you need to address before the year’s up.
As a result, it’s wise to perform a midyear financial checkup on your overall financial plan. Not sure where to start? Do these 10 things:
1. Evaluate Your Budget
If you don’t have a budget, start your midyear financial checkup by creating one. If you do, review your spending to identify which areas came in under budget and which exceeded planned expenditures. Make sure to note any income changes that may affect your budget going forward.
[Read: How to Make a Budget — and Stick to It.]
2. Plug Leaks in Your Budget
If you uncover any unnecessary expenses in your budget, like excessive shopping, subscriptions or other recurring fees, now is the time to eliminate them.
“Review your budget to understand your essential living expenses, and look for opportunities to reduce your financial risk, such as paying off credit card debt or reducing lifestyle expenses that may be hard to maintain in a cash crunch (e.g., memberships and subscriptions, shopping habits, dining out, etc.),” Chad Rixse, a wealth advisor at Forefront Wealth Partners, wrote in an email. “The goal is to be prepared for anything.”
This might include canceling a streaming service or gym membership you rarely use. To finish the year strong, cut the fat out of your budget.
3. Check Your Emergency Fund
A strong budget includes a plan to create and maintain an emergency fund.
“Life can be full of surprises, and a cash reserve provides a critical safety net for unexpected turns. Use your midyear financial checkup for a closer look at your emergency fund and determine whether you’re on the right track or should consider boosting this cash cushion,” Marcos Rosenberg, global head of Marcus Deposits & Marcus Invest at Goldman Sachs, wrote in an email.
This fund should cover essential living expenses for three to six months but the more you can save, the better, Rosenberg said.
[READ: How Your Employer Can Help You Build Emergency Savings.]
4. Boost Retirement Contributions
During a midyear checkup, you should also assess your progress toward retirement and ensure you remain on track to retire at your target date.
If you earned a recent promotion or raise, you may want to increase your retirement contributions. If you turned 50 this year, you may be able to take advantage of catch-up contributions, which allow you to contribute an additional $7,500 to 401(k) plans and $1,000 to IRAs.
5. Review Your FSA or HSA
If you have a flexible spending account, consider your benefits and usage closely, as some employers don’t allow plan participants to carry balances into new plan years. Speak with your human resources department or benefits manager to learn more and make adjustments based on your usage.
It may also be a good time to increase your health savings account contribution to reach yearly maximums. In 2024, you can contribute up to $4,150 for individual plans, and up to $8,300 for plans with family coverage. HSA rules allow you to roll over these contributions and keep them regardless of employment status, so there are no downsides to contributing beyond what you might use in a year.
6. Take Stock of Your College Savings and Student Loans
Parents conducting a midyear financial checkup should review savings rate for college funds and factor in any new projections for college costs the year their children turn 18. Those who have not yet begun saving for college can consider and research education savings options, such as tax-advantaged 529 plans.
On the other hand, if you’re paying off student loans, evaluate your progress. Are you on track, or could you pay more? If it’s the latter, figure that into your budget and supercharge paying them off.
7. Manage and Prioritize Debts
If you want to pay off debt, the midyear checkup is a good time to make a plan.
“If you don’t have a payment strategy in place, now is a great time to start. First, you should incorporate paying down debt into your monthly budget to ensure you’re allocating money each month to it — how much you allocate is dependent on your approach to paying down debt,” Rosenberg said.
Two popular options for debt repayment are the snowball method, which involves paying off the smallest debts in their entirety first, and the avalanche method, which involves paying off accounts with the highest interest rate first.
“Either method works. The snowball is best for someone who is motivated by checking items off a list,” Sean Fox, chief revenue officer at Achieve, wrote in an email. It can help you build momentum faster which can be motivating. On the other hand, the avalanche method may not give you quick wins but will help you save more money in interest.
[READ: Better Money Habits to Start Now.]
8. Inspect Your Credit Report
If you want to start a business, buy a home or open a new credit card, you’ll need a good credit score.
One great financial habit to establish is the midyear credit report check. Look for signs of identity theft or anything that seems amiss by visiting annualcreditreport.com and downloading your free credit reports.
You can also look for opportunities to improve your scores by taking steps like reducing your credit utilization ratio or adding bill payment tracking through the Experian Boost program.
9. Tidy Up Your Taxes
Planning can go a long way when it comes to taxes.
It’s a good idea to keep and maintain records of any tax-deductible expenses, which could include out-of-pocket medical expenses, mortgage interest and charitable contributions, Rixse said.
“Get organized as best you can. I see people scrambling last minute to gather their tax documents and they often miss things in the process,” he added. “Work with your CPA well in advance of tax season to get ready, as CPAs tend to get bogged down come tax season.”
[READ: 10 Apps to Use Now to Make Taxes Easier Next Year]
10. Update Your Estate Plan
Estate planning attorneys typically suggest clients review and update their documents every five years, or when they experience certain life events like a death, birth or marriage in the family.
Documents to review include a will, guardianship directives for those with minor children, any advanced health care directives and powers of attorney, Rixse said.
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Perform a Midyear Financial Checkup in 10 Steps originally appeared on usnews.com
Update 07/25/24: This story was published at an earlier date and has been updated with new information.
