Summer is an ideal time to slow down, reflect and reset your money mindset. You may also find more time to review your financial goals and decide if you need to reboot.
“My advice to anyone looking to ‘clean out’ their financial house is to dust before pulling out a basket of strong sanitizer,” advises Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York. “Don’t get overwhelmed by the idea of keeping your finances perfectly organized, but start small.”
Talking to financial experts, namely accountants and financial advisors, can help you start cleaning up, says Jordan Awoye, managing partner at Awoye Capital in Bayshore, New York.
“Talking to your advisors at the end of the year and the six months in the middle of the year allows us to take responsibility for what the goals are and what we’re trying to achieve,” he said.
Here are three key actions financial experts recommend you take mid-year.
1. Review and reset your budget
Online cash flow software like Mint.com, Personal Capital, and YNAB can also help you track your spending.
Mid-year is also a good time to anticipate and prepare for new expenses. For example, since the federal student loans of millions of borrowers come due this fall, start building those costs into your budget, too.
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“Give yourself practice making payments,” says Corbin Blackwell, CFP and senior financial planner at Betterment. “Start depositing whatever amount you’ve deposited previously (for loan payments) or estimated payment amounts, and put it into a high-yield savings account for the next few months.”
“That way, your budget can be realigned around this extra bill.”
Continue to review your budget regularly to make sure you stay on track.
“We can allocate funds and pay bills monthly, but it’s in our favor to check in weekly to keep up with the high volume of household transactions and make course corrections if necessary, not if,” advises Tim Maurer, chief financial officer and principal advisor at Signature FD, which has offices in Atlanta and Charlotte. He is also a member of CNBC’s Financial Advisory Council.
2. Check your tax withholding
To avoid having too little tax withheld from your paycheck and facing an unexpected tax bill or penalty when you pay your taxes next April, Check your tax withholding. This is the money your employer withholds from each paycheck to cover your federal and state tax obligations.
“When it comes to filing taxes, it’s very easy for people to say, ‘Oh, that’s a big bill,’ or ‘I got a really big tax refund, and I should do something about it,'” Blackwell said. “And then you file your taxes.”
“You cross it off your list and you actually don’t do anything,” he said, adding that now “you still have a little bit of runway until the end of the year.”
Get your latest job pay stub and 2022 tax return, then head to IRS Withholding Tax Estimator Tool Find out if the correct amount of tax withheld is on irs.gov. If you need to change your tax withholding, complete and submit IRS Form W-4 to your employer.
Adjusting your tax withholding now can also help you improve your cash flow and ensure you receive more paychecks and fewer refunds at tax time.
3. Review your retirement savings
Review your workplace retirement savings plan to make sure you’re maximizing your 401(k) contributions. Francis, who is on CNBC, advises: “Make sure that all the money is put into it, and that none of the money is cash.” Financial Advisory Board.
Ashton Lawrence, CFP and senior wealth advisor at Mariner Wealth Advisors in Greenville, S.C., suggests that the beginning of the second half of the year may also be a good time to “evaluate portfolio performance and rebalance if asset allocations are significantly off.”
If your company offers in-plan switching and you can afford to pay your taxes withholding, now might also be a good time to consider moving some of your traditional pretax 401(k) funds to a Roth 401(k).
“We firmly believe that the current tax law will expire in 2025,” said Sam G. Huszczo, founder, CFP, CFA founder of SGH Wealth Management in Lassrup Village, Michigan. “If they do that, they’re going back to 2017 with a 2 to 4 per cent increase in almost every tax bracket.”
“This could be a good time to switch your entire 401(k) savings from the traditional side to the Roth 401(k), even if you’re in a higher tax bracket right now,” he adds. After paying the conversion tax, your money can grow tax-free. However, consult a tax professional to make sure this financial move is right for you.
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