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4 Key Moves for Mid-Year Financial Success

Welcome back to our comprehensive mid-year financial check-in!

Whether you're joining us after completing the first half or starting here, this guide will provide actionable steps to enhance your financial well-being. (If you’re looking for the first half of this guide, please click here.)

As I explained in the first half of this review, I believe June is the perfect time to hit pause, take stock of your finances, and make sure your financial house is in order.

It’s a great way to make sure you’re still on course to meet your financial goals and reenergize you to keep up the good work. And if you’ve let your good intentions fall by the wayside — life throws us all curveballs! — it’s a great time to get back on the horse and work on course correcting.

In the first half, we focused on three critical areas: reevaluating your financial goals, reviewing your budget and spending habits, and assessing your savings. These steps helped you clarify your financial objectives, identify areas for budget adjustments, and ensure your savings are on track.

Now that you have a clear idea of your current financial picture, you’re in the best position to dive deeper into some major subareas of personal finance. In the second half of this review, we'll focus on maximizing your retirement contributions, strengthening your emergency fund, tackling any lingering debt, and optimizing your tax situation. These four areas are crucial for long-term financial health and will help you solidify the progress you've made so far.

Let's get started on the next leg of this journey together!

4) Check Retirement Contributions

Depending on where you are in your career, retirement might seem like a distant horizon or a familiar shore. Either way, you want to sail toward it with purpose.

Look at any retirement accounts you have. First, consider the big picture. Are you on track to meet your retirement goals? Have your investments experienced any big growth or significant setbacks? It may be time to consider making an appointment with your financial planner or reallocating appropriately.

Next, consider whether you're contributing enough to your retirement accounts. Maximize those contributions if you can. If not, increase them gradually. At a minimum, contribute enough to collect any employer match available in your plan. Not doing so leaves free money on the table. Every little bit helps, and it's all about building a future where you can relax and enjoy the fruits of your labor.

If you can't max out your contributions, consider increasing them by 1% of your salary each year. This gradual increase can make a significant difference over time without feeling overwhelming. Remember, contributing to your retirement accounts not only builds your future nest egg but can also provide valuable current-year tax deductions.

Actionable Steps

-Look at the big picture of your retirement; is there anything that needs adjusting?
-Look at contributions; are you contributing enough to meet your goals?
-If not maxing out your contributions, try to at least collect the maximum employer match
-Gradually increase contributions if you can't max out
-Consider allocating windfalls like tax refunds directly to your retirement accounts.

5) Strengthen Your Emergency Fund

An emergency fund is your safety net, your financial umbrella. Personal finance experts all say to shoot for having at least three to six months of living expenses in a liquid account, somewhere you can withdraw from without penalty if you need to. Many banks are now offering high-yield savings accounts that are perfect for emergency savings.

If you haven't reached that goal yet or you’ve fallen behind on adding to it whenever you can, start now. Contribute regularly, even if it's just a little. Look for creative ways to earn extra income, like taking on freelance gigs or side projects or even having a garage sale — every drop in the bucket counts.

Wondering whether to prioritize your emergency fund over other major financial goals like saving for retirement paying down debt? It varies on a case by case basis, but experts tend to agree that you should try to (1) max your employer 401(k) match to make the most of that free money, (2) build your emergency savings, and (3) pay down debt, in that order. If you don’t have emergency savings, you’ll likely have to pay for a major unexpected expense with a credit card, which will simply add to your debt.

Actionable Steps

-Look at your emergency savings; can you cover three to six months of living expenses?
-If you haven’t reached your goal, start making regular contributions now, even if it’s a small amount
-Consider ways to earn extra income that you can put toward your goal

6) Tackle Debt

Debt can feel like a heavy ball and chain dragging down your financial progress. Let’s break it.

First, look at all your high-interest debt. Pull the most recent statement for all your credit cards and any other high-interest loans you may have. Evaluate whether your debt levels have changed since the start of the year. If they have increased, it's crucial to understand why and adjust your spending patterns accordingly so you’re not digging a deeper hole over the next six months.

Next up, you’ll want to come up with a repayment plan that’s right for you. Are you making the minimum payments on all debts? Do you have room in your budget to pay more each month? If you do, focus that on the debt with the highest interest rate first. Once that is paid off, move to the next highest, and so on. Avoid adding new debt while paying down existing balances. This method will help you regain control and improve your financial health.

If you have a lot of debt at high interest rates but a good credit score, it may be worth looking into whether you would benefit from a balance transfer card (many offer 0% interest for 18-24 months) or loan consolidation, which can sometimes offer a better total rate than what you’re currently paying across all debt. Additionally, if you purchased a home when interest rates were at their highs, check to see how much rates have come down and if it’s time to refinance.

Actionable Steps

-Start with your high-interest debt; evaluate any change in spending patterns
-Come up with a repayment plan that prioritizes making all minimum payments (to avoid fees), followed by extra payments (when possible) on the debt with the highest interest
-Keep following your plan until you’ve regained control of your debt
-Consolidate or refinance to lower interest rates if you can

7) Monitor Your Tax Situation

Finally, let's talk taxes. They're part of life, but with a little planning, they don't have to be painful.

Most of us only think about taxes in December (and then again in April when we file them), but it's beneficial to check in mid-year to make sure your withholding still aligns with your expected tax liability. Changes that may impact how much you need to withhold could include things like getting married or divorced, or starting a new job.

The reason this is important is that withholding too much means you miss out on using that money throughout the year, and withholding too little could result in a hefty tax bill come April. Best to get a quick confirmation that you’re still on target.

When my husband and I got married in March 2020 (ah, memories), neither of us considered how the other’s income would affect how much we each needed to withhold until we were greeted by an outsized tax bill the following April. If we had done a mid-year check-in, we could have caught it much earlier.

(Not sure what you should be withholding? There are great online calculators that will give you a free estimate.)

Next, consider whether you could benefit from any tax-saving strategies, like maximizing contributions to tax-advantaged accounts and tracking deductible expenses. Also, make sure you're on track with your estimated tax payments if you're self-employed. If not, you still have plenty of time to catch up. By staying proactive, you can avoid surprises and make the most of your income.

Also, if you have complicated taxes or you don’t understand your tax bill in April, this is a great time to set up an appointment with a tax professional, as they’ll have more time in their schedule than they do in the runup to Tax Day.

Actionable Steps

-Look at whether your tax withholding aligns with your estimated tax liability; adjust if needed
-Consider whether you’d benefit from any tax-saving strategies; if so, start now
-Update any tracking for deductible expenses and charitable contributions
-If you have any self-employment income, make sure your estimated payments are on track
-Schedule appointment with a tax professional if needed

Woo! Pat yourself on the back, friend. You did it. Time to kick your feet up and relax knowing exactly where your finances stand.

Hopefully, you’re on track or even ahead of where you need to be to meet your goals this year. If so, be sure to celebrate! Now you can take that vacation or buy that new thing without worrying if you’re setting yourself back. Guilt-free spending is the best kind.

And listen, even if you fell behind on your goals the first half of the year, you still have six months to turn things around. The year is still young; the glass is still half full. Even if you’re only in a position to tread water for a few months, you’ve now identified any glaring problems you had in the first half of the year and have a list of specific steps to ensure they don’t get worse.

Doing a mid-year financial check-in is your chance to reassess, recalibrate, and recommit. So do it! Take control, make those adjustments, march forward with confidence! Come December, when you're looking back on this year, you'll want to see progress. You'll want to see success. And that starts now.