Here’s how to do a mid-year financial check up.
1. Begin with your savings. By this time, your emergency fund should have been set up and should be on its way to hitting the minimum amount required. In case you forgot, financial advisors suggest an emergency fund equivalent to three month’s income at the very least to a maximum of six month’s income. This amount should be sufficient to cover unexpected expenses should you lose your job or someone in the family gets sick. If you’re good with your emergency fund, the next thing to look at is your retirement savings. You should have enough money to match whatever your employer has set up for you. Your goal is to increase that amount to ten percent of your income at the very least.
2. Second, you need to look into your investments. Most people employ the “set and forget” type of investment strategy. But if you are someone on target, a periodic check of your portfolio is necessary. You can begin by assessing how diversified your portfolio is. If it is quite diversified, you need to go back to your original allocation target. From there, make an intelligent assessment whether you are still aligned to the target. If not, make the appropriate rebalancing.
3. Third, If you get reimbursed for some costs because you are funding a flexible spending account, then you need to sort out the expenses you incurred for the first semester of this year. You have to understand that you will forfeit any unused money in your flexible spending account. If you are far from halfway through your money, you would need to ramp up qualified expenses like a new dental work or new prescription eyeglasses.
4. Fourth, you have to consider your mortgages. It is good that interest rates remain low although there are indications that they may be up soon. The real estate market is rebounding and some people who were disqualified for refinancing may now qualify. Does your home value have more equity now? You can take the path of refinancing if you are planning to stay in your current home for the next five years. But you have to be quick because interest rates continue to shoot up.
5. Fifth and last, do not forget to check on your credit reports. There may be inaccuracies there of indications of identity theft. Take advantage of websites that offer free credit reports. If your credit score is quite low, minimize your credit spending and focus more on paying off existing debts to boost your score.