WiserAdvisor – Blog

Main Menu

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
logo
Header Banner

WiserAdvisor – Blog

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
Financial Planning
Home›Financial Planning›10 Reasons Why You Must Conduct a Mid-Year Financial Checkup

10 Reasons Why You Must Conduct a Mid-Year Financial Checkup

By WiserAdvisor Insights
August 28, 2020
2470
0
Share:
10 Reasons Why You Must Conduct a Mid-Year Financial Checkup

Last Modified on October 13, 2020

Financial planning is not limited to knowing what to do with your money. It is impacted by various aspects from time-to-time and needs to be revisited and modified to ensure it is in line with your financial goals. A mid-year financial checkup helps to build your holistic financial well-being. Such a strategy becomes even more critical in a tumultuous year like 2020, putting financial situations in flux.

Table of Contents

  • Here are 10 Reasons Why you Must Conduct a Mid-Year Financial Checkup:
    • 1. Review monthly spending
    • 2. Evaluate savings contributions
    • 3. Check credit record and fees
    • 4. Gauge debt repayment plans
    • 5. Rebalance investments
    • 6. Evaluate taxes
    • 7. Assess emergency fund
    • 8. Adapt to major life changes
    • 9. Review beneficiaries
    • 10. Update goals
  • To sum it up

Here are 10 Reasons Why you Must Conduct a Mid-Year Financial Checkup:

1. Review monthly spending

Even if you created a monthly budget at the beginning of the year, it is possible that you might be spending over the limit now. Expenses on dining, take-outs, entertainment, monthly subscriptions, travel, etc. often tend to go overboard. Moreover, you could have withdrawn funds for an emergency or a major unexpected expense, like a house repair. Hence, a financial checkup in the middle of the year can help to determine where your income is being spent and in what share. It helps to go through your bills, monthly deductions, bank statements, etc. to identify areas exceeding the budget. You can then find ways to curb your spending and stay within the planned budget. For example, if you are paying $9 a month for a music subscription and $15 a month for a streaming video service, you are paying $288 for both the services annually. If this goes beyond your budget, you could choose a cable TV connection or satellite services and reduce your overall costs.

2. Evaluate savings contributions

While planning finances, you may have set your monthly and annual savings rate at the beginning of the year. Ideally, savings should comprise 10-15% of your income. However, it is possible to miss the target sometimes. A mid-year checkup helps you re-think your expenses, make new adjustments, and ensure that you make up for the lost savings. Alternatively, a six-monthly assessment helps to evaluate your contributions to accounts, like the 401(k) account, a 403(b) plan, or an IRA (Individual Retirement Account), etc. The Internal Revenue Service (IRS) often modifies the contribution limits to these accounts. Thus, a semi-annual assessment can help keep up with the new limits, allowing you to maximize your tax advantages. In 2020, the IRS announced that employees could contribute up to $19,500 in 401(k) plans. Taking this into consideration, an employee who was 49 years old in 2019 would be able to increase his share by $7000 in 2020. This will include $500 in standard contribution and $6,500 in catch-up contributions at the age of 50.

3. Check credit record and fees

The importance of maintaining a healthy credit score (above 750 points) is paramount to enjoying a good financial standing and reputation. Thus, it is advisable to take a half-yearly assessment of your credit reports to identify any monetary discrepancies and deficiencies. Some bureaus, like Experian, Equifax, and TransUnion, provide free credit reports every 12 months. You can check these reports for any errors or suspicious activity, or simply analyze your own activity. If you fall short on the score, you can improve by paying bills on time, keeping the deficient balance low, repaying debts, and being more cautious of your debt liability in general.

Similarly, you may have examined your bank fees and credit card charges at the beginning of the year. But often, banks and credit institutions, levy new charges, which could drain your savings silently. Thus, a mid-year financial checkup can bring attention to such charges and help you cut unnecessary fees.

4. Gauge debt repayment plans

It is beneficial to list all your debt and interest rate obligations in the middle of the year for an in-depth review. This includes your student loan repayments, mortgages, car loans, and other debts. In case you have missed a payment or are likely to miss one in the future, it is advisable to inform your lender beforehand. This could help you save on penalties and avoid a negative credit score. Alternatively, if your mid-year review leaves you with some extra money at hand, you can use this to repay your debt obligations.

5. Rebalance investments

While many would advocate not interfering with investments and letting them be, it is good to know the value of your investment portfolio from time-to-time. Volatility in the stock market can have severe implications for your retirement savings accounts. Even though acting in the moment is not prudent advice, it is beneficial to assess if a strategic move can help minimize losses. For instance, you could set a stop-loss order for the sale of shares. A mid-year review can enable you to balance your portfolio as per your risk tolerance at a given life stage. For example, if you are nearing retirement in another 6 months, it is best to check if your asset allocation mainly comprises secure bonds and fewer equities. Alternatively, if you have more than 10 years left to retire, rebalancing assets to make more investments in stocks can be a good idea.

6. Evaluate taxes

From the time you frame your tax plans at the beginning of the year, there could have been several changes that might have impacted your final tax liability. Modifications in tax laws, changes in income, alterations in retirement contributions, etc. can alter your tax obligations. A semi-annual assessment of your taxes can help you reduce your tax burden and mitigate tax consequences. Moreover, major life changes, like marriage, having a child, getting divorced, etc. can also alter the amount of tax you pay. Hence, it is best to get a mid-year tax estimate and make adjustments accordingly.

7. Assess emergency fund

A half-yearly note of your emergency fund status can help determine if there is sufficient money (at least 3 months of living expenses) in reserve for uncalled events. This is even more essential in conditions, such as during the COVID-19 pandemic, which slowed the economy, shut-down businesses, and increased unemployment, leaving several with a loss of income.

8. Adapt to major life changes

Changes, including moving houses, adopting new living arrangements, the birth of a child, marriage, divorce, or fluctuations in income, etc. can have significant financial impacts. A semi-annual review can help you adapt your financial plan to reflect these changes. You could increase your life cover for insurance, make more investments, create a new budget, increase your contingency funds, and a lot more.

9. Review beneficiaries

A mid-year financial check involves an assessment of all beneficiary designations. This can help you pass on your estate to suitable heirs and in the right share. Specific assets, such as an IRA, a 401(k) account, a college savings plan, annuities, mutual funds, etc. can be passed on to your nominees, in case of an untimely demise, incapacitation, or disability. Reviewing them regularly helps you match them as per your current wishes. This also ensures that your beneficiaries are updated in accordance with life events, like marriage, divorce, death of a spouse, birth or adoption of a child, etc.

10. Update goals

Middle of the year is a perfect time to review your financial goals, assess if they are still achievable (given your financial situation), and take appropriate actions to stay in line with the final objective. For example, if you planned to take early retirement at 55 years, but your current financial conditions lack adequate funds for retirement, you may have to continue working for a few more years. That said, a semi-annual check is also a great time to set some new plans, if you have not already done so.

To sum it up

Mid-year financial checkups are a strategy of a prudent planner. Even if the assessment reveals diversions from goals, overspending, piling debts, etc., there is plenty of time to bring everything back on track. It helps to conduct mid-year reviews. You can also seek help from professional financial advisors for guidance on how to begin.

Tags#IRA401k planBeneficiaryEmergency Fundfinancial planningInvestmentTaxes
Previous Article

5 Reasons Why Trusts Are Not Just ...

Next Article

8 Reasons to Avoid the Urge to ...

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0
WiserAdvisor Insights

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related articles More from author

  • Conversation with Your Financial Advisor
    Financial Advisor Guide

    The Need for Honest Conversation with Your Financial Advisor

    February 26, 2020
    By WiserAdvisor Insights
  • Retirement
    Retirement Planning

    Should Your Portfolio Become More Conservative as You Approach Retirement?

    January 22, 2021
    By WiserAdvisor Insights
  • Financial Planning Actions
    Financial Planning

    10 Financial Planning Actions to Consider During an Economic Crisis

    June 29, 2020
    By WiserAdvisor Insights
  • Investing Successful in the Long Run
    Financial Planning

    7 Things that Make Value Investing Successful in the Long Run

    September 24, 2020
    By WiserAdvisor Insights
  • Financial-Planning
    Financial Planning

    5 Misconceptions About Financial Planning that You Must Steer Clear Of

    December 31, 2019
    By WiserAdvisor Insights
  • Claiming Social security
    Retirement Planning

    Top Six Reasons to Delay Claiming Social Security Benefits

    September 9, 2019
    By WiserAdvisor Insights

You might be interested

  • planning
    Estate Planning

    Importance of Tidying Up Your Estate Plan So Your Loved Ones Face No Inconvenience

  • IRAs
    Retirement Planning

    Things You Should Remember About Automatic IRAs

  • Wealth-Preservation
    Financial Planning

    Wealth Creation v/s Wealth Preservation

Don't miss out! Get our Helpful Financial Tips Newsletter

  • Popular Posts

  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • Do's & Don't investment portfolio

    The Dos and Don’ts to Protect your Investment Portfolio in a Bear Market Amid The ...

    By WiserAdvisor Insights
    April 22, 2020
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • Retirement-Planning

    Retirement Planning checklist

    By WiserAdvisor Insights
    July 8, 2019
  • Why investing for goals is the right way of investing

    Why Investing for goals is the right way of Investing?

    By WiserAdvisor Insights
    July 16, 2019
  • Portfolio diversification

    5 Dangers of Over-Diversifying your Portfolio

    By WiserAdvisor Insights
    July 26, 2019
  • Financial Planning for couple

    The Complete Guide on Financial Planning for Couples

    By WiserAdvisor Insights
    August 1, 2019

Categories

  • Business Finance (2)
  • Education Planning (29)
  • Estate Planning (20)
  • Financial Advisor (1)
  • Financial Advisor Guide (27)
  • Financial Planning (111)
  • Investment Management (54)
  • Personal Finance (9)
  • Portfolio Management (1)
  • Retirement (9)
  • Retirement Healthcare (1)
  • Retirement Planning (79)
  • Retirement Plans (1)
  • Uncategorized (2)

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice. A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

WiserAdvisor is America’s oldest and largest independent network of screened financial advisors. We make it easy and convenient for consumers to find and connect with advisors in their area. We have successfully helped over 100,000+ individuals find their best financial advisor since 1998 with no match fees, no commitments, no obligation, and complete confidentiality. WiserAdvisor has been featured in The Washington Post, The Washington Journal, ABC, CBS, Yahoo and has been seen in numerous other leading financial news and information websites.

Follow Us

  • Recent

  • Popular

  • Financial Planning for a Baby

    Financial Planning To Prepare For a New Child

    By WiserAdvisor Insights
    June 20, 2022
  • Lower Your Financial Advisor Fees

    How to Lower Your Financial Advisor Expenses

    By WiserAdvisor Insights
    June 13, 2022
  • ROTH IRA 5 YEAR RULE

    A Guide to the Roth IRA 5 Year Rule

    By WiserAdvisor Insights
    June 9, 2022
  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • Do's & Don't investment portfolio

    The Dos and Don’ts to Protect your Investment Portfolio in a Bear Market Amid The ...

    By WiserAdvisor Insights
    April 22, 2020

Contact Us

Corporate Headquarters

12150 Monument Drive, Suite 700
Fairfax, VA, 22033

Business Hours

8:30 AM – 5:00 PM EST (Monday – Friday)

Email Address

wa.assistance@wiseradvisor.com

Phone Number

(703) 651-2060

Fax Number

(703) 259-4487

  • Privacy Policy
  • Terms & Conditions
© Copyright 2021 WiserAdvisor.com. All Rights Reserved.

Add WiserAdvisor - Blog to your Homescreen!

Add