If you’re like me, some years you get really inspired by setting money goals, but for others, it just doesn’t happen. Whether you set financial resolutions at the beginning of the year or wish you had, this post is for you. I’ll review ways to improve your finances with a mid-year checklist for more success.
What is a mid-year money checkup?
The beginning of July marks the year’s halfway point, so it’s a perfect time to review your finances, make any needed adjustments, and stay on track with your goals.
If you don’t have any money goals, create some by simply jotting them down on paper or in a computer spreadsheet or app. Aim high and hold nothing back!
You may want to remodel your kitchen, take a memorable vacation, get out of debt, buy an investment property, put a child through college, or have an early retirement. Whatever it is, please write it down no matter how out of reach it may seem.
Another way to focus your financial life and goals is to set a word or theme as your money objective. It could stay the same your entire life or be a “word of the year” that captures your current dreams, like retirement, financial freedom, charity, self-employment, or anything that motivates and inspires you to create good money habits.
Take 30 minutes or an hour to apply the following 7-point checklist to your finances. You’ll likely find areas where you’re in great shape, some you need to improve, and get tips for strengthening your finances before the year ends.
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Calculate your net worth.
Knowing your net worth is critical because it helps you understand your overall financial health. It’s similar to stepping on the scale when you want to lose weight. If you don’t have a starting point or metric, it’s difficult to know if or when you make progress or finally hit your goal.
I created a document to calculate and track my net worth called a Personal Financial Statement or PFS. It’s different from a basic net worth statement because it includes additional information you should keep up with.
You can create your PFS on paper, a Word doc, or a spreadsheet–but if you’d like a copy of mine, you can download it when you sign up for The Money Stack at LauraDAdams.com. It automatically comes to your inbox for free!
Creating your PFS isn’t difficult, but gathering and recording your information may take a little time. Using my template, you’ll find a tab for listing your assets. These are things you own that have value, such as real estate, cars, jewelry, sporting goods, cash in the bank, taxable investments, and retirement accounts.
You can aggregate lower-priced items under categories, such as household furnishings and electronics; however, be as precise as possible for expensive items, like real estate and vehicles. Once you list your assets, my PFS will automatically add them up.
Also, consider if each of your high-dollar assets is adequately insured. I include a section on my PFS for insurance policies, including home, auto, life, disability, and personal liability. Be sure to include your insurer’s name, policy number, and the amount of coverage you have. Remember that your insurance protections should increase as your income net worth increases.
Below your assets, list your liabilities or what you owe, such as mortgages, car loans, student loans, personal loans, credit cards, and balances on lines of credit. You’ll find a separate tab for liabilities on my PFS that automatically gives you a total and subtracts it from your total assets. The resulting number (positive or negative) is your net worth.
If you have a higher net worth than last year, you increased your assets, decreased your debts, or both. Even going from a negative net worth to a meager net worth shows you’re making progress! So take the time to download my PFS or create your own and use it as a financial benchmark at the beginning and mid-point of each year.
In episode 806, Laura reviews 13 critical things you can do to achieve financial success. Use this checklist to adopt better habits that move you closer to your money goals. Listen in the player below.
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Review your debt balances.
If you have high-interest loans or credit card debt, it can be difficult to achieve financial success because it takes up so much of your income. So, don’t accept expensive credit card debt as a way of life or allow it to rob you of the ability to save and invest.
If you’re financing a lifestyle you can’t afford, try waiting a little longer before buying something, sticking to a budget, and focusing on getting and staying out of debt to build financial security.
My book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, is an in-depth resource you can find as a paperback, ebook, and audiobook. When you update your PFS, take note of your debts and their interest rates. In general, it’s best to tackle them from highest to lowest interest rate to save the most in interest.
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Strengthen your savings.
A cash cushion helps you reduce stress, navigate financial hardships, and avoid debt. Review how much liquid savings you need and if you have enough in a high-yield bank account.
If you need more, automate your emergency savings with a separate direct deposit that puts a flat amount or a percentage of your paycheck in the bank. Just ask your employer to set it up. Or, if you’re self-employed, create a recurring transfer that moves money from your checking into a savings account on a monthly or weekly basis.
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Estimate your retirement contributions.
If you have a retirement plan at work, such as 401(k), 403(b), 457, or government Thrift Savings Plan, review how much you contributed for the year. You can log on to your online retirement account to make contribution changes or ask your benefits administrator or an account custodian for help.
For 2024, you can contribute up to $23,000 or $30,500 if you’re over 50. If you can max out your retirement account or get as close as possible before December 31, I highly recommend it.
Additionally, many employers match retirement contributions. That helps you build a larger nest egg and reduce taxes. Even if you can’t max out a retirement plan, contribute enough to get the most matching funds possible.
There isn’t a year-end deadline for other retirement accounts, such as an IRA or a SEP-IRA. You can make contributions for a tax year up to the due date for your tax return, including any filing extensions.
If you still need to start investing for retirement, don’t make the mistake of thinking that you’re too young or that you’ll make up the difference later. Young people can amass a fortune on far less than someone who starts investing later in life due to the power of compounding.
ALSO READ: 5 retirement options when you’re self-employed
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Make the most of your health insurance.
Your health insurance benefits and deductibles are tied to an annual schedule. So, mid-year is a good time to see whether you’ve reached your deductible. If you have or are close, save money by scheduling needed appointments and paying for healthcare before the end of the year. Otherwise, starting on January 1, your deductible will be reset.
In other words, after you reach your annual deductible, you have the opportunity for your insurance company to pay as much of your medical expenses as possible. Delaying appointments means you could end up paying more than you have to.
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Estimate contributions and spending for medical savings accounts.
If you have a flexible spending account (FSA) through your employer, it’s also linked to the calendar year. Many employers offer them to help workers save for qualified expenses, such as childcare and medical expenses, on a pre-tax basis.
However, there’s a deadline to spend your FSA each year, or you forfeit most of the excess. That’s known as the “use it or lose it” rule. The cutoff varies by company, but it’s typically December 31.
You might opt for preventive care or supplies, such as dental checkups, vision exams, new prescription glasses, or contact lens solutions, so you don’t lose one penny in the account.
Note that there’s no spending deadline if you have a health savings account (HSA). Funds can stay in the account indefinitely with no penalty, even if you change insurers, become uninsured, or are unemployed.
For 2024, you can contribute up to $4,150 to an HSA when you have a qualifying, high-deductible health plan for yourself. If you have HSA-eligible family coverage, the HSA contribution limit doubles to $8,300. So, see if you can max out the account by year-end.
Are you curious about life insurance policies? What life insurance do you need and why? Laura answers a listener’s question about it in episode 838. Listen in the player we have below.
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Review your emergency documents.
If you had significant life changes in the first half of the year, like getting married, divorced, or having or adopting a child, update your emergency documents. They might include a will, health care proxy, and power of attorney. If you don’t have emergency documents, make an appointment with an attorney to set them up as soon as possible.
Also, review critical financial accounts, such as retirement plans, life insurance, and bank accounts, to double-check your beneficiaries. If you don’t name one, retirement funds typically go to a spouse, even if that person is now your ex-spouse. So, update them if you want the funds to go to someone else.