Halfway through the year is the perfect time to reevaluate your finances, especially with the inflation crisis and economic changes that the United States is experiencing. Reassessing allows you to make the changes necessary to stay on track with your financial goals. Continue reading for financial planning tips for the second half of the year.
Check In On Your Budget
If you set up a budget at the beginning of the year and haven’t been revising it monthly, halfway through the year is a great time to reevaluate. To properly check in on your budget, evaluate your spending over the past six months, including any automatic payments and subscriptions. If you have not been sticking to your budget, make the proper adjustments necessary to stick to it for the rest of the year.
Evaluate Your Savings
An emergency fund is a crucial piece of your savings. It’s meant to be a rainy-day fund to cover any unexpected costs you may experience, such as a medical bill or an expensive car repair. A good rule of thumb is to have three to six months’ worth of living expenses set aside in your emergency fund. By evaluating your emergency fund amount, you can add in a section of your budget to contribute to your emergency fund monthly.
Start Tax Planning
Tax planning is not only meant for tax season. By checking in on your tax position, you will be able to adjust your withholding accordingly if you are expecting a refund or will have a higher tax liability. You’ll also be able to make sure you’re taking advantage of any tax savings opportunities.
If you are contributing to a 401(k) or an IRA, see if you’re on track to take advantage of the tax savings. For 401(k)s in 2022, you can contribute up to $20,500 with a $6,500 catch-up contribution if you are 50 years old or older. The tax benefits of 401(k)s is the lowering of your taxable income since contributions are made with pre-tax dollars. The 2022 contribution limit for IRAs is $6,000 and a catch-up contribution of $1,000 for those aged 50 and up. IRA contributions are tax-deductible, lowering your tax liability for the year.
With a high deductible health insurance plan, you may be offered a Health Savings Account, also known as an HSA. Contributions are made with pre-tax dollars, lowering your taxable income. The contribution limits for HSA are $3,650 for single insurance plans and $7,300 for family insurance plans. If you are 55 years old or older, you take advantage of a $1,000 catch-up contribution.
Review Your Debts
If one of your financial goals is to pay off your debt, midyear is the perfect time to check in on your progress. You also want to make sure that you are making all of your payments on time, so you are not incurring late fees and are staying on track with your payments. By checking in on your budget and reviewing your debts, you can devise a plan for tackling your debts.
When paying off debts, you want to start with your highest interest debt, typically credit cards or personal loans, to save money on interest over time. If your only debts are secured debt, such as a mortgage or a car loan, check in with a financial advisor to see if you should aim to pay those debts off early or focus on another financial goal.
Handling your finances on your own can be overwhelming; you know what goals you want to reach but might not know how to get there. Instead, have an advisor from Mooney Lyons Wealth by your side. Our advisors will help guide you through the ongoing financial planning process and ensure you are working towards your financial goals. Schedule a consultation with us today to get started.