#financialgoals

As life emerges from the pandemic to a “new normal,” a mid-year financial checkup may be more important than ever this year.  Here are some ways to make sure that your financial situation is continuing on the right path.

Reassess your financial goals

At the beginning of the year, you may have set financial goals geared toward improving your financial situation. Perhaps you wanted to save more, spend less, or reduce your debt. How much progress have you made? If your income, expenses, and life circumstances have changed, you may need to rethink your priorities. Review your financial statements and account balances to determine whether you need to make any changes to keep your financial plan on track.

If you are a BFSG client, please remember to contact your financial advisor if there are any changes in your personal or financial situation for the purpose of reviewing our previous recommendations.

Take a look at your taxes

Completing a mid-year estimate of your tax liability may reveal new tax planning opportunities. You can use last year’s tax return as a basis, then factor in any anticipated adjustments to your income and deductions for this year. Check your withholding, especially if you owed taxes or received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid owing a big tax bill next year or overpaying taxes and giving Uncle Sam an interest-free loan. You can check your withholding by using the IRS Tax Withholding Estimator or by talking with your tax advisor. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.

Tax planning typically is backwards looking at just the past year. We recommend you take a proactive forward-looking approach by coordinating with your tax professionals to find ways to reduce your taxes now and in future years.

Check your retirement savings

If you’re still working, look for ways to increase retirement plan contributions. For example, if you receive a pay increase this year, you could contribute a higher percentage of your salary to your employer-sponsored retirement plan, such as a 401(k), 403(b), or 457(b) plan. For 2021, the contribution limit is $19,500, or $26,000 if you’re age 50 or older. If you are close to retirement or already retired, take another look at your retirement income needs and whether your current investment and distribution strategy will provide the income you will need. Check out BFSG’s recent webinar on Retirement Accounts (Traditional vs. Roth) and learn ways to maximize your retirement savings.

Evaluate your insurance coverage

What are the deductibles and coverage limits of your homeowners/renters insurance policies? How much disability or life insurance coverage do you have? Your insurance needs can change over time.  As a result, you’ll want to make sure your coverage has kept pace with your income and family/personal circumstances. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.

Ask questions

Finally, you should also ask yourself the following questions as part of your mid-year financial checkup:

• Do you have enough money in your emergency fund to cover unexpected expenses?
• Do you have money left in your flexible spending account?
• Are your beneficiary designations up-to-date?
• Have you checked your credit score recently?
• Do you need to create or update your will?

As always, our team of CERTIFIED FINANCIAL PLANNERS™ stands ready to assist: financialplanning@bfsg.com.

Prepared by Broadridge Advisor Solutions. Copyright 2021. Edited by BFSG, LLC.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

“How do I get rich?” This is one of the most common questions we get from friends, family, and clients.

There is no set definition of ‘being rich’. There is not a one-size-fits-all solution. Everyone has a different situation and financial goal. Also, it is important to mention that becoming rich or building wealth takes time – it is not an overnight process. Well…unless you win the lottery. But let us be realistic. You likely are not winning the lottery. You could, but chances are you should be working on Plan B.

There are some common rules that most financially successful people follow that have helped them achieve their goals:

1. The first rule is quite simple. You must earn it. If you want money, you must work for it. For some, that means a second job. For others, it means you must get a job to pay for school to open the door for a higher paying job. We are in the middle of a pandemic, and we understand that it is easier said than done. But if you cannot land a job, you can always do side projects or provide a service for someone who is not able to do the task on their own. It might not be a long-term fix, but it is a good temporary fix. Where there is a will, there is a way.

2. The second rule is without a doubt much harder than the first. You must save and invest your money wisely. If you spend everything you earn, you will not get the opportunity to let your money work for you. The power of compounding interest is a marvelous thing that you may not be taking advantage of. To get to the second rule and the following rules, you must have rule one checked off.

3. For the third rule, you must control your spending. Yes, this is the cousin of saving. We can not tell you not to buy that fancy watch or that lottery scratch-off ticket. If you can afford something that you want, sure you can go buy it. But, do not spend money you do not have yet. Most people who are well off, try to get the most bang for their buck. That means to maximize the benefits of what you are purchasing while keeping the costs low.

4. If you have gotten to rule four, you are on the right track. What you must do now is to minimize your tax liabilities. The more you pay in taxes, the less you have to save and invest. The power of compounding interest works better when you have a large nest egg, to begin with. How can you minimize your taxes? Well, you should be taking advantage of tax-deferred investment accounts. You can do that through a retirement account through your employer such as a 401(k) or a 403(b). You also can use an IRA. There are some rules regarding these retirement vehicles, but more on that in another discussion.

5. The fifth rule is to surround yourself with like-minded people. If your current group of friends can’t wait until payday to go blow that paycheck at the bars, you may want to reevaluate who you spend your time with. Spending time with people who have good financial habits reduces the temptation to overspend and encourages the right financial habits. This goes for marriage, too. Finances are the number one cause of divorce, so ensure you and your spouse are on the same page. No one wants to go through a divorce, so have honest conversations and seek help from a financial planner or counselor if needed.

Remember this is not a sprint. This is a marathon; there is no rush. Set small goals, achieve those goals before moving on to the next bigger goal. It can be done, so remain positive, and take care of your health. It is hard to generate income when you are not able to work. We will leave you with this: “How do you eat an elephant?” … “One bite at a time.”

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.