Midyear Money Moves for Your Financial Plan

The halfway point of the year is the perfect time to check in on your finances. Use this time to see what progress you’ve made on the goals you set at the beginning of 2022 and what adjustments might be necessary.

These midyear check-ins don’t have to be needlessly complicated or stressful. Instead, your objective should simply be to compare your year-to-date progress with your previously set goals and make (usually minor) course corrections as necessary.

So how should you go about your check-in, and what midyear money moves are essential? Below, we’ll cover some easy moves you can make now to ensure you stay on track.

Check In on Your Budget

Our loyal readers are probably tired of me saying this by now, but checking in on your budget is vital. Reviewing your income and expenses will help you more fully understand your day-to-day finances. This is especially important in 2022 with the recent rise in the cost of living; U.S. inflation reached a 40-year high earlier this year, meaning your expenses have likely gone up since January.

During your midyear review, ask yourself, “Have I been sticking to my budget throughout the year? Are there any changes I need to make? Or how are the changes I have already made turning out?”

Due to this year’s market volatility, inflation, and the largest annual salary increases in decades, it’s unlikely that the budget you created in January is still working for you. Now is the perfect time to see where you could cut costs, such as subscription services you barely use, and check on the status of your financial goals, like building your emergency fund.

And until the U.S. gets inflation under control, try using The Wall Street Journal’s new inflation tracker. This tool allows you to see your personalized inflation rate based on the things you buy within your budget.

Face Your Debt Head On

Coming to terms with your debt standing can be scary. But the longer you put off dealing with it, the worse it will get. In fact, carrying debt is becoming more expensive due to rising interest rates. By paying down debts sooner, you will save money on interest over time.

If you have multiple types of debt (student loans, credit cards, car loans, a mortgage, etc.), start by first paying down the highest-interest debt (often, but not always, your credit card). Investigate refinancing or consolidation options that could change your debt from a variable to a fixed rate. As rates continue to rise, having a fixed payment can bring some stability to your budget.

If you have federal student loans, be aware of the end date of forbearance. As it stands now, payments will resume on September 1, 2022, unless there is another extension. If you have not been paying your student loans since forbearance began, you may have taken this expense out of your budget. If so, one of your biggest midyear money moves should be factoring this debt payment back into your monthly expenses.

Review Your Retirement Savings

Are you on pace to meet your retirement savings goals this year? Instead of looking at the balance of your retirement accounts, which are probably down on the year, focus on your annual contributions and investment allocation.

With the current market volatility, balances are fluctuating. By focusing on contributions instead of balances, you can ensure you’re on track to maximize your investments (and potentially your tax savings). Remember: All traditional 401(k) contributions are made with pre-tax dollars, lowering your taxable income for the year. Staying consistent with your 401(k) contributions will reap a massive reward once the market fully rebounds from the recent bear market.

Now is also a good time to revisit your risk tolerance and allocation. Has your risk appetite increased or decreased? Has your retirement date changed? Questions like these are great to address at the beginning and middle of each year to ensure your retirement goals stay on track.

Estimate Your Tax Withholding

Halfway through the calendar year is a great time to check your IRS tax withholding. Unfortunately, the average American often makes the costly mistake of withholding too much or too little for Uncle Sam. This oversight typically leaves the taxpayer with either limited cash flow or a massive tax bill the following year.

In recent years, the IRS has added a tax withholding calculator to its website to help taxpayers estimate how much they should withhold to prevent either extreme. Once you have completed the withholding estimator, you can update your W-4 with your employer to avoid any significant tax surprises.

Stressed About Midyear Money Moves? We Can Help

Completing these four midyear money moves can positively impact your financial plan and potentially get you back on track if recent market and inflation woes have derailed your initial estimated trajectory.

Need some help? Having an experienced and knowledgeable financial planner by your side can be a game changer. Our advisors at Felton & Peel Wealth Management can help you build a robust financial plan and reach your financial goals. Schedule a consultation with us today to get started.

Malik S. Lee, CFP®, CAP®, APMA®
Malik Lee is the Managing Principal of Felton & Peel Wealth Management. A CERTIFIED FINANCIAL PLANNER™ with more than 15 years of financial services experience, he is a Guest Lecturer at Morehouse College, serves on the CFP Board Council of Examinations, and is a Board Member for the FPA of GA.
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