8 Step Summer Financial Checkup

If you find yourself with a bit of extra time on your hands with the pandemic this summer, you may want to use this opportunity to check in on your family’s finances. While doing a thorough analysis of your wealth may sound intimidating, we’ve broken it down into eight simple steps to keep you focused and on-track.

Step 1: Analyze Your Budget

 An effective way to avoid spending more than you’re earning is to step back and take stock of your monthly and annual budget. Men spend an average of $125 over their monthly budget, while women spend an average of $71 over their budgets. Does your spending match up? And if you don’t have a budget at all, use this time to make one.

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 the best look at your spending habits, you may want to evaluate your savings and spending record over the past 6 to 12 months.

As you’re reviewing your budget and expenses, take the extra time to thoroughly evaluate your current providers and coverage options. This includes your internet, cable and wireless service providers in addition to your insurance coverage options. If you tend to set up autopayments and forget about your monthly bills, this could be an opportune time to revisit what it is you’re actually paying for.

Step 2: Seek Out Tax Savings

Do you scramble to pull your paperwork together every April or July this year? This year, try taking a different approach to tax season by evaluating your tax-saving strategies early. You may want to work with your financial planner or tax professional to create a mock tax return, as this can help you understand your withholding options and tax-saving opportunities such as 401(k) or 403(b) options, IRAs and HSA contributions.

Focus on filing any time-sensitive deductions and brush up on changes in tax laws. Reaching out to your tax professional now could mean you have more time to prepare and strategize together for next year’s returns.

Step 3: Tackle Your Debt

American household debt currently sits at $13.21 trillion. If you’re guilty of putting off managing your amounting expenses, now’s the time to start planning to pay it off. While most consumers have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll likely want to focus on managing and eliminating.

While you could be tempted to simply pay off what shows up on the bills each month, you may 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 whether you’re gradually working down the amount or falling farther into the hole.

Step 4: Revisit Short and Long-Term Goals

A lot can change in a year - marriage, death, divorce, growing your family and experiencing a major career change. Even seemingly small adjustments, like being furloughed, job promotion or sending a child 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 progress towards them while revisiting and evaluating your shorter term goals as well. It has been noted that 60% of Americans report benefitting from receiving retirement advice from a financial professional.

Step 5: Evaluate Insurance Coverage and Providers

Go back through your documents and make sure you are properly covered. Take pictures and create an inventory of your belongings. Especially big household possessions such as electronics and furniture. Write down how much you paid for them and continue to update your inventory with new purchases. Only 50% of homeowners have a home inventory.

It's also a good time to review your life insurance policy if your family has grown or if your income has changed significantly. Among adults who were insured all year, 29% were underinsured in 2018, up from 23% in 2014. 

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.

Take a look at all of your open bank accounts and brokerage accounts, check your statements and consolidate and or close any accounts as necessary.  

Step 7: Review Your Retirement Savings

Whether retirement is decades down the line or within the upcoming year, 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 can lead to some major issues down the line. As you assess your legacy plan, make sure you’re accounting for any newly acquired assets (houses, cars, pets, etc.) while checking that your designated beneficiaries are still appropriate and your executor and trustee are willing and able to assist in the event of your passing.

While you’re likely daydreaming of life returning to normal in the near future, don’t forget to do yourself a favor and squeeze in some financial assessing. Performing your own financial checkup annually gives you time to prepare for tax season, budget for the upcoming holiday season and acquire peace of mind knowing your family’s finances are aligned with your future goals and current needs.