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Mid-Year Financial Review

Mid-Year Financial Check-In

Summer is officially here! 

And while your days may be busy with work, kids, BBQ’s and summer travels it can also be a good time to take stock of your financial picture and make updates where necessary. Especially given all that we have experienced in the first 6 months of 2022.

Below are a few things you should consider to keep your plan in shape. We cover areas that impact different stages in life as well as some timely topics to keep you on track in 2022 given the continued market volatility and persistent inflation. 

Cash Flow Management

Inflation is impacting each and every one of us, from prices at the pump to the cost of groceries. Almost everything has ticked up in price and it is impacting people of all income levels.  

Which is why it is more important than ever to get a solid understanding of what is coming in – your gross & net income – and what is going out – your fixed and variable expenses. 

If you have never taken the time to analyze your cash flow or create a budget, then the results may shock you. But it is better to be informed so that you can make any necessary adjustments rather than to ignore the situation and let inflation erode your cash and eat into your savings. 

While you are at it, think about what lies ahead for the rest of the year, such as holiday shopping, which costs the average American nearly $1,000! Start setting money aside now to avoid racking up high interest debt this holiday season. 

Use this simple cash flow worksheet to help you track your money: DOWNLOAD HERE

Investment Portfolio

It comes as no surprise when I say that the stock and bond markets are down to start the year. And if you weren't previously aware of that then you likely are after receiving your recent quarterly statement from your investment accounts.

In fact, both stock and bond markets are experiencing one of the worst starts to a year on record. But that doesn't mean you should sell everything and hide. Trying to time the market is incredibly difficult and not a reliable long-term strategy. 

Instead, this is the time to review your portfolio, understand how you are invested, whether you are taking the appropriate amount of risk for your financial goals and whether there are any adjustments to be made. Adjustments may come in the form of upgrading investments, rebalancing between asset classes or strategically taking losses to offset realized gains and lower your 2022 tax bill.

College Savings Plans

If you plan to contribute to your child’s college expenses and haven’t started saving yet then I suggest you start sooner than later to let compounding work for you. 

You can fund a 529 plan with up to $16,000 per year and still qualify for the annual gift tax exclusion (2022). However, you can also make a one-time contribution of 5-times the annual limit, $80,000, to catch up for lost time.  

If you have a 529 plan set up, it’s a good idea to revisit your allocation as your child gets closer to college age, to make sure you’re not taking too much risk.

Risk Management

Life insurance is critical to keeping your family’s lifestyle and goals on track. 

For most people, a term life policy offers the ability to cost-effectively replace your salary during your prime earning years. The rule of thumb is the policy should be 5-10 times your annual pre-tax income.

It may also be time to think about an umbrella liability policy to protect your assets over and above your existing liability coverage in your auto and property insurance. 

Retirement Savings

Volatility in the markets has increased and is likely to remain elevated. 

If you are decades away from retirement, then you can likely afford to take risk and weather this period of volatility. 

However, if you’re within ten years from retirement, you may want to revisit your asset allocation and potentially dial back the risk. You don’t want your entire retirement nest egg at risk in the stock market when you are nearing the time that you will need to rely on it. 

Additionally, if you turned fifty during the last six months, you are now eligible to make the additional “Catch Up Contribution” to your IRA in the amount of $1,000 or 401(k) of $6,500. This not only adds significantly to your retirement savings, but it’s also a good way to lower your tax bill in the year you make the contribution.

Charitable Giving

If you haven’t yet sorted your plan for charitable giving for 2022, the slower pace of summer can be an excellent time to think about what is meaningful to yourself and your family and where you would like to see your contributions go to make a difference. Come up with a plan now, so you aren’t up against year-end deadlines during the busy holiday season.

Setting up a donor-advised fund allows you to contribute now, but you can postpone the decision of what charities you want to give to. A qualified charitable distribution from a tax-deferred retirement account can allow you to donate and meet your required minimum distribution (RMD) for the year, which can be an advantage in keeping income at low enough levels to avoid the Medicare IRMAA surcharge.

Final Thoughts

Thinking about your financial picture holistically and keeping all the different pieces tuned up is important to make sure you and your family are achieving your goals and staying protected. Taking the time to check in with some of the bigger items before you turn to the lazy, hazy days of summer will have you in great shape when Fall rolls around.