The first half of 2020 has already flown by, which leaves many people anticipating what is to come. With beach trips replaced by classrooms and the holidays coming up quicker than expected, it is wise to take some time to re-group your finances for the next part of the year. We wanted to provide 6 best practice tips to help you adjust your finances mid-year and prepare for what’s to come.
1. Adapt Your Plan to Life Changes
We are all experiencing a change in some form or another. The Coronavirus has changed how we work, interact with family and loved ones, and live our daily lives. You may have needed to adjust your finances during this time to support a new way of life. That is okay. Adaptation is an essential part of our survival. Here are a few ways you can work on adapting your plan to life changes.
- Understand that it’s okay to have to cut back, adjust or re-prioritize your money and goals as life changes.
- Focus on the people, places, and things you value, instead of focusing on anxiety and fear.
- Try to accept that change is naturally uncomfortable, and not everything will be perfect, but that it will be okay.
2. Re-Work Your Budget
Your spending will likely look different over time. That’s why it’s essential to take a look at your budget and monthly spending habits on a regular basis. This might simply be checking your credit card statement or using an app like Mint, Wally, or Pocketguard to set a budget and track expenses. Ask yourself: “How have my spending habits changed over time? How can my budget adapt to reflect those changes while still keeping me on track to reach my goals?”
The second half of the year often comes with more spending, particularly with the presence of holidays. Here are a few things you can do to prepare for those spending shifts.
- Prioritize getting ahead of heavy second-half-of-the-year-spending by saving a little extra for gifts each month. Keep in mind that those gifts might look different this year, depending on your financial situation.
- Plan for expected changes in lifestyle like having a baby, moving to a more expensive area, increased medical bills, extra contributions to retirement accounts or other savings ventures, and adjust your budget to reflect these changes.
- Take care of your needs first. The impacts of the coronavirus may have changed the way you spend your money. Be sure to make a plan that prioritizes your financial wellness.
3. Review Your Taxes
Mid-year is a great time to look at tax-withholdings and charitable giving. Proactive tax planning will help you lessen your tax bill and strengthen your financial plan. A few ways you can do that are below.
- Look for ways to increase your tax refund.
- Re-visit your filing status and tax bracket.
- Decide if you will itemize deductions or take the standard deduction.
- Seek out credits that apply to your financial situation. There are credits for education like the American Opportunity Tax Credit or the Lifetime Learning credit. There are also credits for dependents such as children and elderly living with you, as well as child care, earned income tax, and many more. It pays to understand what tax credits may apply to you.
- The goal of donating to charity isn’t necessarily for the tax benefit, it’s to give to society and the greater good, however, giving to charity may lower your income given your own situation. It can be advantageous to set aside money for charity and plan a specific time to make those donations. If you are in a high tax bracket, giving to charity may help you reduce your taxable income, while making a worthwhile contribution.
4. Keep Saving
There are many things to save up for on a regular basis. Your emergency fund, retirement accounts, and long-term savings goals to name a few. Even if you can’t contribute to those funds in the same capacity, as long as you continue to build them up, it will be largely beneficial later on. Here’s a checklist to keep your savings on track:
- Examine both your short-term and long-term savings goals. Have they changed? How can your saving strategy reflect that?
- Decide what money needs to be saved where. For example, will you need a new car? A new roof? A child’s education? How much do you expect to spend? Within what time frame will you likely make that purchase? Determine what goals you have and which areas of life it is that you need to save.
- Max out your contributions to retirement accounts (Traditional IRAs, Roth IRAs, 401(k), etc.).
Maintaining a strong savings strategy will help keep you on track to reach your goals. Even if it needs adjustments, do your best to actively save for your future.
5. Tackle Your Debt
Look at your debt reduction strategy and take inventory of your current situation. Assess how much debt you have and look at potential solutions for paying down that debt within a specific time frame. Possible solutions may include:
- Suspended student loan payments. From March 13-September 30 of 2020, the interest rate and payments for student loans are suspended by the federal government.
- Lower credit card interest rates. It’s not a bad idea to ask your credit card company for a lower interest rate. If you’ve proven to be a loyal member, the company may be willing to reduce your interest rate.
- Better refinancing opportunities for your mortgage, student loans, auto loan, and bank loans. Successfully getting approved for refinancing with a lower interest rate can provide you with lower monthly payments and increase your leverage by freeing up more of your money, which can then be allocated toward other needs and goals.
It’s important to tackle your debt with a strategy so that you may best optimize your future choices. When looking at paying down your debt, start with identifying the debt load you currently possess. Decide whether it makes more sense to rapidly pay off your debt or to pay it off slowly over the course of a longer period of time. Then determine how much you can reasonably pay off on a regular basis. Lastly, stay disciplined and stick to your plan.
6. Give Yourself a Break
There’s no doubt that COVID-19 has impacted you in some way, shape, or form. The changes that have come as side effects of the pandemic are stressful. It’s crucial to take time for yourself to both mentally and physically recharge.
Our team is here to support you and get your finances on the right track. Together, we’ll dig deep to uncover your goals, create a tailored strategy to reach them, and set up bite-sized and actionable “to-do’s” to help you move forward.
As your life and goals evolve, we’ll be here to help you adjust. Schedule a call with us to help get your finances on the right track.