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8 Step Summer Financial Checkup  Thumbnail

8 Step Summer Financial Checkup

Every year, for almost everyone, summer signals a time to slow down and relax in the sun and the shade. The rush of winter holidays has passed, taxes are complete, and most schools are closed which means the kids or grandkids are around enjoying their time off. With vacation days scheduled and high temperatures ahead, it’s likely that you'll find yourself with a lot of extra time on your hands.

For those reasons and the simple fact that we have hit the halfway point of the year, now would be a great opportunity to make the time to check in on your family’s finances. A thorough financial checkup always seems intimidating at first, so we’ve broken it down into eight simple steps to keep you focused and on track.

Step 1: Analyze Your Budget

In early 2022, the Bureau of Economic Analysis reported that the personal savings rate is at only 6 percent.1

An effective way to avoid spending more than you’re earning is to take a moment to make an itemized list of your spending habits and recurring costs (such as subscriptions) and reevaluate those costs against your monthly and annual budget. And if you don’t have a budget at all, use this time to make one.

Many credit cards or banks offer a breakdown of your spending based on categories, which can provide a starting point for your list; this will provide a great way to visualize what you’re spending the most money on and if there’s room to cut back. You may find that some of your major costs can be eliminated, such as a subscription you no longer need or use. 

To get the best look at your spending habits, you may want to evaluate your savings and spending record over the past six to 12 months.

Step 2: Seek Out Tax Savings

Do you scramble to pull your paperwork together every March and April? This year, try taking a different approach to tax season by evaluating your tax-saving strategies early. You may want to work with your financial planner or tax professional to create a mock tax return, as this can help you understand your withholding options and tax-saving opportunities such as 401(k) or 403(b) options, IRAs and HSA contributions.

Is every tax season a panicked race to find all the necessary documents and organize the paperwork? This summer, set yourself up for success in March and April by evaluating your tax-saving strategies early. 

Set up a meeting with your financial professional and work together to create a mock tax return, as this can help you understand your withholding options and tax-saving opportunities such as 401(k) or 403(b) options, IRAs and HSA contributions.

Focus on filing any time-sensitive deductions and brush up on changes in tax laws. Reaching out to your tax professional now gives you more time to prepare and strategize together for next year’s returns.

Step 3: Tackle Your Debt

An alarming 38 percent of adults carry credit card debt from month to month.2 If you’re guilty of procrastinating managing your amounting expenses, now is the time to create an action plan to pay them off. 

While most consumers have some amount of good debt (including mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll want to focus on managing and, immediately or in the near future, eliminating altogether.

While you could be tempted to simply pay off what shows up on the bills each month, you may want to create a debt summary to get a better idea about the big picture of your total debt. By creating an annual debt summary, you and your financial professional can better understand whether you’re gradually working down the amount or falling farther into the hole.

Step 4: Revisit Short and Long-Term Goals

A lot can change in a year - marriage, death, divorce, growing your family and experiencing a major career change. Even seemingly small adjustments, like a job promotion or sending a kid off to college, can have a significant impact on your financial status. That’s why it’s important to regularly meet with your financial professional to review your long-term goals and progress towards them while revisiting and evaluating your shorter-term goals as well.

Step 5: Evaluate Coverage and Providers

For some people, this step may more logically follow the first step, as you review your recurring costs. It can only help to take the extra time to thoroughly evaluate your current providers and coverage options. This includes your internet, cable, and wireless service providers in addition to your insurance coverage options. If you tend to set up auto payments and forget about your monthly bills, this could be an opportune time to revisit how much you are actually paying for how many services and whether or not all of those still fit in your budget and lifestyle.

Step 6: Reassess and Rebalance Your Portfolio

An important aspect of maintaining your financial health outside of a six-month checkup is evaluating your portfolio and risk tolerance regularly to help keep it in line with your tolerance, goals and market conditions. While most managed portfolios will be rebalanced automatically, it is important to take stock of your investments’ big picture. Doing so can help you determine if you need to diversify differently or reassess your risk tolerance.

Step 7: Review Your Retirement Savings

Whether retirement is decades down the line or within the upcoming year, it is always good to get in the habit of reviewing your retirement savings on an annual basis. Take the time to assess whether or not you’re maxing out your retirement contribution options and how the savings you’re putting aside today - with the help of Step 1 - will translate into retirement income later down the line.

Step 8: Assess Your Estate Plan

It is never fun to plan for the worst-case scenario, but it is absolutely essential. Leaving your family with an outdated will, trust, or estate plan can lead to major issues down the line. As you assess your legacy plan annually, make sure you’re accounting for any newly acquired assets (houses, cars, pets, etc.) while checking that your designated beneficiaries are still willing and able to assist in the event of your passing.

In between hard-earned lazy days of book reading, beach-going and backyard barbecuing this summer, don’t forget to do yourself a favor and squeeze in some financial assessment as well. 

  1. https://www.bea.gov/data/income-saving/personal-saving-rate
  2. https://www.nfcc.org/resources/client-impact-and-research/2021-consumer-financial-literacy-and-preparedness-survey/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.