9 Step Summer Financial Checkup
It seems like when summertime hits, time slows down. The hustle and bustle of the holiday season is over, the taxes are complete and the vacation days are scheduled. If you find yourself with a bit of extra time on your hands in the upcoming months, you may want to use this opportunity to check in on your family’s finances. While doing a thorough analysis of your wealth may sound intimidating, we’ve broken it down into nine 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 6.4 percent.1 An effective way to avoid spending more than you’re earning is to step back and take stock of 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 will offer categorical breakdowns of your spending, which can be a great way to find out what you’re spending the most money on and if there’s room to cut back. 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.
Focus on filing any time-sensitive deductions and brush up on changes in tax laws. Reaching out to your tax professional now could mean you have more time to prepare and strategize together for next year’s returns.
Step 3: Tackle Your Debt
An alarming 62 percent of adults have carried over credit card debt in the last 12 months.2 If you’re guilty of putting off managing your amounting expenses, now’s the time to start planning to pay it off. While most consumers have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll likely want to focus on managing and eliminating.
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 of your total debt’s big picture. By creating an annual debt summary, you and your financial advisor 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 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
As you’re reviewing your budget and expenses, 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 what it is you’re actually paying for.
Step 6: Reassess and Rebalance Your Portfolio
It’s important to visit 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’s 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, reviewing your retirement savings on an annual basis is a great habit to start. Take the time to assess whether or not you’re maxing out your retirement contribution options and how the savings you’re making today will translate into retirement income later down the line.
Step 8: Assess Your Estate Plan
It’s not fun to plan for the worst-case scenario, but leaving your family with an outdated will, trust or estate plan can lead to some 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.
Step 9: Make Sure to Keep Your Finances Separate.
Review how you handle your business and personal finances. Avoid the many unnecessary potential headaches down the road by keeping these separate. Yes, it can be more convenient to take the easy route and combine business and individual finances but if for some reason you get sued by a customer, vendor, or business partner, you'll be able to handle the situation in a more clear headed manner. Plus you can get a much more accurate look at your business and how it is actually performing.
So don’t forget to do yourself a favor and squeeze in some financial assessing this summer. Performing your own financial checkup annually gives you time to prepare for tax season, budget for the upcoming holiday season and acquire peace of mind knowing your family’s finances and your business are aligned with your future goals and current needs.
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