Take These Easy Steps For Financial Health

Posted by: Joseph Kuo | July 13, 2022

It seems like when summer time hits, time slows down. The hustle and bustle of the holiday season is still a few months away, taxes have been filed, and family vacation plans are set in motion.

If you find yourself with a bit of extra time on your hands during the summer months, you may want to take this opportunity to check in on your family’s financial health. While doing a thorough analysis of your wealth might sound like a lot of work, we’ve broken it down into eight simple steps to keep you focused and on track. You can of course do these steps during any time of the year, but summer is typically a time when there’s less going on.

Step 1: Analyze Your Budget

In early 2022, the Bureau of Economic Analysis reported that the personal savings rate is at only 6 percent. An effective way to save more and build financial health 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. Even a simple budget can go a long way in reining in spending.

If you haven’t done a budget before, it doesn’t have to be overly complicated. A simple comparison of your monthly income versus your total monthly expenses would be a great start. If you’re starting out, a basic spreadsheet can help you total up expenses. 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 an even better 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 might want to take this opportunity to schedule a mid-summer meeting with your financial planner or tax professional to create a projected tax return for the current year, as this can help you understand your withholding options, potential deductions, and tax-saving opportunities such as 401(k) or 403(b) options, IRAs and HSA contributions.

Reaching out to your tax professional now will give more time to prepare and strategize together for next year’s returns. Your tax professional should be more readily available during the tax off season and have more time to find tax savings strategies for you.

Step 3: Tackle Your Debt

An alarming 38 percent of adults carry credit card debt from month to month. If you’re guilty of putting off managing your amounting expenses, now’s the time to start planning to pay them off. While most consumers have some amount of necessary debt on their plate such as a mortgage, It’s credit card debt that you’ll likely want to focus on managing and eliminating.

While it might be easy to simply pay off what shows up on the bills each month, the minimum monthly payment on credit card bills is almost all interest and can take years to repay in full. To quickly tackle credit card debt, focus on paying off the highest interest accounts first.

You might 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 how much progress you’re making towards paying off your debts.

Step 4: Revisit Short and Long-Term Goals

A lot can change in a year: marriage, divorce, growing your family, and job or career changes. Even relatively smaller milestones, 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 make sure you’re progressing towards them while revisiting and evaluating your shorter-term goals as well. If you’re not sure about your goals, a financial advisor experienced with motivational interviewing can work with you to formulate goals that align with your values and priorities.

Step 5: Evaluate Insurance Coverage/Service Providers

As you’re reviewing your budget and expenses, take the extra time to thoroughly evaluate your current providers and insurance policies. 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 each auto payment is for, and whether you still actually need it.

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

Building your retirement savings is a key part of financial health. Whether retirement is decades down the line or in the next few years, 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 (or worse yet, not having one at all) can lead to some major issues down the line. Thus, an annual review and update of your estate plan is an important checkup step. As you review your legacy plan, make sure you’re accounting for any newly acquired assets (houses, cars, stocks) while verifying that you have designated beneficiaries on your bank, investment, and insurance accounts as well as their updated contact information..

Don’t Neglect Your Financial Health

While you’re likely daydreaming of book reading, beach-going and backyard barbecuing this summer, don’t forget to do yourself a favor and take care of your financial health as well. Better yet, if you truly want to focus on summer vacations and family and don’t want to worry about doing your own financial checkup, an experienced financial advisor can do all of the above for you.