Stay on Track: 10 Tips for Midyear Financial Planning

Presented by Weller Group

Although we all have the best intentions when we set financial goals each January, a lot can happen in 12 months to cause you to veer off course. Nobody wants to arrive at the end of the year and encounter a financial mess. One great way to keep yourself on a steady path to meeting your goals is to do a midyear check so you can make any necessary adjustments.  Consider using these 10 guidelines to ensure that your spending and investing are on track. 

¹Please refer to the table at the end of this article to find links to various calculators to help with midyear planning.

Review your cashflow

This is the most basic step you can take to keep yourself on a path to financial health. Look at your spending through the middle of the year and determine whether you’re right where you want to be, if you need to cut back, or if you have extra funds accumulating in your bank account. If you haven’t set a budget, this could be a good time to draft one and establish goals.  

Reconsider your investment contributions & investment distributions

1. Contributions - Do you have cash which could be invested – especially to take advantage of stock and bond markets which have sold off over the first half of the year? If you have excess income or if you have accumulated excess cash in bank accounts, consider redirecting the income or cash into investments.
2. Distributions – If you are withdrawing money from investment accounts, have you discovered you are not spending all of the money?  If this is the case, consider decreasing your investment distribution amount.   This would allow you to retain more investment principal, thus leaving more money in your account to participate in future market growth.

Assess income tax projections to determine if you are on pace for a refund or payment

It’s a good idea to check your tax withholdings midyear, especially if you’ve had major life events such as a job change or significant pay changes.  Consider following these steps:

1. Calculate the following for the first 6 months of the year:  
   • total income, 
   • taxable portion of the total income, 
   • federal tax withholding/payments
   • state tax withholding/payments
2. Determine the expected pace over the remainder of the calendar year for each of the four items.
3. Total the expected year-end figures for each of the four items, as if you are totaling the dollar amounts expected to be used when preparing this year’s income tax returns.
4. Create “mock” tax returns by pretending you are completing your 2022 federal and state income tax returns.  Are you on pace for a refund or a payment?

The IRS has many tools that can assist in determining whether your tax withholdings are appropriate.

Consider rebalancing your investment portfolio 

The volatility during 2022 may have caused your investments to drift away from your strategy.  A reasonable first thought when addressing how your money should be invested is to consider how much money you expect to need to distribute from your investments over the next several months (ex: 12 – 18 months) for living expenses or for other financial goals.  This is also a good time to determine if you have an opportunity to lower your expected income taxes by “harvesting” unrealized capital losses within non-retirement investment accounts.  In summary, consider evaluating both retirement and non-retirement investments to determine if any investment products should be changed whether for current expenses, future expenses, asset allocation rebalancing or income tax planning.

Review insurance policies and protection plans 

Have you had changes in your life that would warrant modifying your insurance coverage?   If any life-changing events in your family have occurred such as – marriage, birth, death, graduation, new property, disposing of property, health changes, damage to property, children aging off of insurance policies, starting a business, buying a house, or other life events – use this midyear check to reevaluate your insurance needs for any of the following types of insurance:  

1. Homeowners
2. Renters
3. Automobile or other vehicles
4. Equipment (warranties)
5. Umbrella liability
6. Life
7. Disability
8. Long term care
9. Health

Review employer-sponsored benefits

1. Confirm your open enrollment dates over the next 12 months, and schedule calendar reminders to make any necessary adjustments to benefits.
2. Determine if your employer will be adding, deleting or revising any benefits.
3. Assess your pace contributions to 401k, health savings accounts (HSA), flexible spending accounts (FSA) and Section 125 benefit plans.
4. Determine if you should modify your health insurance plan (is a single, two-person or family plan most suitable?)
5. Consider whether you have any benefits from past employment, such as pension, 401k, stock options, restricted stock units, etc.  If so, determine your expected action plan to manage such benefits.

Review your credit report and credit cards

1. You’re legally entitled to a free copy of your credit report every 12 months from each of the three national credit bureaus (Equifax, Experian, and TransUnion). Take advantage of that opportunity to check for fraud or mistakes so you can remedy any issues as quickly as possible.  Consider saving a hard copy or PDF of your credit report, to be able to track your progress over time.
2. Review the credit report to determine if there have been any inquiries for credit which do not align with your recollection.  Specifically, assume your report reflects a company inquired about your credit eligibility.  If you are certain you did not apply for credit from said company, you should notify each of the three credit reporting agencies immediately to file notice of suspected fraud.
3. If you have dormant credit accounts (ex:  could be revolving credit at a store, a credit card, or a home equity line of credit) with $0 balances and no intention of using the account in the future, consider closing the account.  Accounts with $0 balances – yet with the availability of being able to tap the account for credit – can negatively impact your credit score.
4. Review your credit card transactions for recurring payments to companies which might no longer be needed (ex:  do you have multiple Alexa, Apple or Netflix accounts?).  Delete the unnecessary recurring payments.

Evaluate your emergency fund

Determine whether you have too much or too little cash for emergencies.  Think of this as a cash reserve, which would be some amount in excess of the cash you keep on hand for ongoing day-to-day expenses.   Here is an extremely subjective and personalized – yet reasonable – process you could follow to determine a suitable cash reserve:  

1. Pretend as though you wake up in the middle of the night and your first thought is the amount of money in your emergency fund.  What is the minimum amount of cash reserve you require to be comfortable enough to go back to sleep? 
2. Next, think of the maximum amount of cash reserve.  This should be an amount that would prompt you to want to invest some of the cash reserve, simply because it is too much cash in the bank. 
3. Consider the minimum and maximum amounts to be your cash reserve zone.  Notice this is purposely not a static figure (which would be impossible to maintain day to day), but instead is a range of money (which is more realistic to maintain day to day).

Determine if contingency, legal and estate plans reflect your current intentions

Regardless of whether you’ve experienced life events such as marriage, divorce, death of a family member, birth of a child or grandchild, change in mental capacity (or any other possible life-altering events) – the present is always a good time to go through a “what-if?” dry run by determining what would happen if you were incapacitated or deceased.   (The best way to enact this scenario is to not coach whoever is supposed to take over the role of your executor, health care agent or power of attorney).  Here are some hypothetical scenarios you could envision to then act out what would happen if the hypothetical scenario became reality.  Assume you are disabled, incapacitated or deceased:

1. Who needs to be contacted? (family, attorney, financial advisor, tax advisor, insurance agent, bank, employer, health insurance company, Social Security, DMV, etc).  
2. Are any of your bills, investments, insurance and bank accounts set up for paperless statements?  If so, what mechanism is in place for someone else to access the websites?  Recall that in the circumstance of having e-delivery or paperless preferences, by definition there will be no paper mail arriving to alert someone of bills, investments, insurance or bank accounts. 
3. Who is your trusted contact person, or TCP?  Your TCP is the person you should have already instructed to act on your behalf should you be rendered unable to act.  Is your TCP aware they have (or would have) these responsibilities?
4. Does your will reflect your intentions?  Was it signed before children became adults, does it accommodate for grandchildren, does it address any unique circumstances (like second marriage, spendthrift provisions, children or grandchildren who are not yet able to manage their own money, or special needs due to health issues?)
5. Do you have beneficiary designations attached to investments, insurance or bank accounts?  If so, know that such beneficiary designations override your will.  Do your beneficiary designations reflect exactly how you want your money distributed upon death?
6. Do you have a power of attorney (POA)?  Does the POA language allow (or, prevent) your would-be agent from acting on your behalf?   Should the POA be evaluated to determine if revisions should be made?  Does it make sense to submit the POA to any of your investment, insurance and bank companies so that the POA is already on file and ready to be used in the event you become unable to transact your own affairs?
7. Do you have a health care proxy?  Specifically, your own health care proxy (versus a proxy you signed with a specific doctor or for a specific procedure at a hospital).
8. Do you have a living will, and does it reflect your current intentions (do you or do you not want extraordinary medical treatment if the situation occurs)?   
9. Is there any need to change the title or deed to any property you own?  
10. What is the plan of action in the event you need extended home, assisted living or nursing home long term care?

Set financial goals for the rest of the year

Six months is plenty of time for situations to change and goals to shift. If nothing has changed, ensure that you are staying on track with your initial objectives. If major changes have happened in your life, you may want to reassess your financial goals for the remainder of the year. 

We are available and willing to help you with any questions or concerns.  If you want to have a conversation, please contact Weller Group to schedule a phone call, virtual online meeting or in-person office meeting.

Contact info

Phone 315-524-8000

info@wellergroupllc.com

www.wellergroupllc.com

Disclaimers

1. The following tools/hyperlinks are being provided as a courtesy and are for informational purposes only.  We make no representation as to the completeness or accuracy of information provided at these websites.
2. Weller Group cannot give income tax advice and cannot provide specific tax calculations.  Any references to income taxes should be construed as general guidelines.  Please consult a qualified tax advisor.
3. Weller Group cannot give legal advice.   Please consult a qualified legal advisor.

¹Tools and hyperlinks

Weller Group is located at 6206 Slocum Road, Ontario, NY 14519 and can be reached at 315-524-8000. Securities and Advisory Services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network.