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Mid-year Review – Four Approaches to Ensure Your Finances are on Track   Thumbnail

Mid-year Review – Four Approaches to Ensure Your Finances are on Track

July is a good time for a financial checkup as it marks the halfway point of the year. Are you on track? What adjustments are needed? Here are a few areas to check in on. 

Review Goals and Adjust Priorities 

Generally, it’s wise to stick to the plan, unless an adjustment is needed because of a shift in goals or priorities. What life changes have occurred or are likely to occur? We’ve seen some interesting shifts – some were influenced by the pandemic and others are because life is curly. Here are some of the things we’ve heard:  

  • Pivoting within our business or to a new job opportunity.
  • Help a family member buy a home in a red-hot residential market and accelerate their inheritance. (Note: U.S. existing home prices were up 24% in the last year (through May), the highest year-over-year change in the past 20 years – and the Fed continues to purchase $40 billion of mortgage bonds monthly to curb mortgage rates, but fuels surging home prices).
  • Increased desire to retire and stay retired.
  • Resume travel and increase our spending. There have been over 1.9 million airline travelers per day in the U.S. over the last week alone representing the highest amount since March 11, 2020. We were averaging 500k daily a year ago and under 100k daily at the pandemic low, per TSA.gov.
  • Assisting elderly parents as long as possible.

Fine-Tune Your Investments

Stocks and home prices are at all-time highs. Core inflation is the highest since 1992, job openings are at an all-time high, junk bond yields are at all-time lows, oil is at $73 a barrel (versus negative oil futures prices in April 2020), cryptocurrencies are down 50% plus since the Elon Musk “Saturday Night Live” appearance and lumber is down 50% from its May high. Are we at a peak or a pause?

  • The required long-term investment return to maintain your financial goals, that is, how hard your money has to work for you, matters. Your financial plan should drive your investment strategy and strategic asset allocation, not the market (although tactical strategies can reflect market opportunities or risks).
  • Review your 401K allocations and adjust accordingly (are you still in cash since the Pandemic Crash in 2020?). Slow and steady wins the race. Keep funding and investing your 401K on a consistent basis – dollar-cost averaging works! And rebalance your portfolio – if your 60% stock allocation has grown to 70% then trim – this is the “buy low/sell high” beauty of rebalancing.

Reduce Your Tax Bill 

Are you paying the minimum amount legally required? Playing it smart tax-wise helps you accumulate more wealth and use it as you wish. Consult your CPA or tax preparer.

  • Are you contributing the maximum to your 401K or at least enough to get the maximum employer match? Are you eligible to fund a Health Savings Account (HSA) that may later be used to fund qualified medical expenses tax-free?
  • What if you don’t have a retirement plan at work? Workers can consider funding an IRA. Employers should explore adopting a retirement plan to help fund employees’ needs – some new plans provide tax credits.
  • Review if you should fund on an after-tax basis (Roth) and explore if Roth conversions make sense in your situation.
  • Watch for potentially new tax legislation that may impact your tax planning.

Protect Yourself 

Check in on your insurance, estate planning and legal areas.

  • Review your insurance with your advisors and agents.
  • Do you have adequate coverage (life, disability, fire/auto, and umbrella liability to name some biggies) and is the coverage cost-competitive? Review healthcare coverage and long-term care considerations.
  • Did you have any family changes (additions, deletions, name changes) that would require updating your policy beneficiaries? 
  • Review important documents including wills, living trusts, powers of attorney, etc. to better control your outcomes. Tax law changes may require adjustments in entity and transaction structuring as well as in your estate plan.

It is helpful to have an optimistic view for the future. However, it is also prudent to be balanced. Life isn’t meant to be easy and she has a way of surprising us. May you have sage advice and secure your future wisely.

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