🗝️ Unveil hidden paths for a midyear money makeover and ignite your journey to prosperity
Summer is the typical “rest season”; where everyone kind of slows down and takes a break away from what usually is a tedious first half of the year.
But it could also be an ideal time to reflect and reset your money mindset. You can also find more time to review your financial goals and decide whether you need a good old-fashioned reboot.
We know all about spring cleaning, but summer gives you a headstart if you decide to clean up your finances. Sound interesting? Well, here are three must-do actions you can take for a midyear money makeover.
Review and reset your budget
It’s all in the taxes
Evaluate your retirement savings
Your budget needs a redo
The B word (budget, please) gets a mixed reaction from anyone who comes across it. But it’s an essential tool if you ever want to get your affairs in order. You need to know what comes in, and what you’re paying out.
It can be as simple as dividing a sheet of paper with a straight line, and listing your income sources on the left while all (mandatory) expenses like mortgage/rent/, car payments, credit card bills, and other monthly payments go on the right.
Or you can make use of online software like Personal Capital or Mint to automate how you track your spending.
Remember how the Boy Scouts say “Be prepared”? Well, midyear is a perfect time to start getting prepared for any new expenses that may inevitably pop up throughout the rest of the year. For instance, if you’ve got a student loan on your record, your next payment will be due by fall (September) this year, so brace up and include these costs in your budget.
But just how do you adjust to this new bill/ budget?
Financial planner Corbin Blackwell (Betterment) suggests a practical approach: simulate payments for a few months. Either set aside the amount you typically allocate for loan payments or estimate the payments and save them in a high-yield savings account. This proactive step helps your budget adjust to the upcoming bill seamlessly.
Evaluate your tax withholding
Tax bills/ penalties. Yuck! No one wants those. But it could happen to anyone, so long as you have too little tax withheld* from your pay
*Tax withholding refers to the money employers withhold from your paycheck and put toward your federal and state taxes
To ensure you don’t face any surprise tax bills or penalties in the next tax season (April), take a moment to review your tax withholding.
Here’s how to go about it in simple steps:
- Grab your latest pay stub(s) and your 2022 tax return.
- Visit the IRS Tax Withholding Estimator tool. It will help you determine if the correct amount of taxes is being withheld.
- If you find that adjustments are needed, complete an IRS Form W-4 and submit it to your employer.
- By making these adjustments now, you can positively impact your cash flow and receive a larger paycheck throughout the year, rather than a substantial refund during tax time. This way, you’ll be better prepared for any financial surprises that may come your way.
Review your retirement savings
Here’s a deep question: is your workplace retirement savings plan optimizing your 401(k) contributions? You need to ensure that you’re (profitably) investing all available funds and that you’re avoiding leaving money in cash.
As we enter the second half of the year, take time to review your investment portfolio’s performance. If your asset allocation has significantly deviated, consider rebalancing, suggests Ashton Lawrence, a senior wealth advisor at Mariner Wealth Advisors.
Sam G. Huszczo, a CFP, CFA, and founder of SGH Wealth Management in Lathrup Village, Michigan, cautions about potential tax law changes in 2025, which could raise tax brackets— up 2% to 4%.
With that in mind, if you’re in a low tax bracket, it might be beneficial to explore moving some of your traditional, pretax 401(k) funds to a Roth 401(k), provided your company offers that kind of conversion and you can manage the initial tax cost.
The advantage of doing this now is that once you pay the taxes on the converted money, any future growth in the account will be tax-free. Of course, Remember to consult a tax professional to ensure this step gels with your financial goals.
💫Transform Your Finances Today!
As the summer season sets in, why not embrace the spirit of change and embark on a transformative financial journey? With our midyear money makeover tips, you have the chance to revitalize your financial outlook and set a course for prosperity.
With these actions, you’ll be well on your way to a successful financial makeover. Remember, if you need personalized guidance, seek advice from a tax professional or financial advisor to ensure your strategies align with your unique goals.
