Summertime is a great season for so many activities-grilling some burgers, swimming at
the beach or taking in a Twins game at Target Field.
One activity that probably isn't at the top of your summer to-do list is reviewing your finances. We think it should be.
A mid-year checkup can help ensure everything is humming along as you have planned and provides you more opportunities to take advantage of year-long planning strategies. We recommend doing the following when conducting your personal mid-year financial review.
Check on the goals you set in January
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Did you set yourself some financial New Year's resolutions? Are you still on track to reach
those goals? If the answer is "no," think about what you can do to try to get yourself back
on track and begin working on those resolutions anew.
Whether you hoped to decrease your debt, increase the amount you're putting away for retirement or beginning to save money for holiday shopping, you may be surprised by how much you can accomplish towards those goals if you diligently work toward them during the second half of 2016.
Think about your taxes
Tax season-typically February through April-gets lots of attention from the media. However, it's the planning that's done outside of filing season that often has the biggest impact on the size of your tax bill. Many powerful strategies that you can use to reduce your taxes and the ripple effects from an unexpected spike in income need to be utilized before the end of year.
Many readers are probably making tax-deferred contributions to their 401(k). If you have the means, you may want to increase your contributions over the course of the year to decrease your taxable income. Since your 401(k) has a significantly higher contribution limit compared to your IRA ($18,000 vs. $5,500 if under age 50; $24,000 vs. $6,500 if age 50 or older), it gives you greater ability to reduce your adjusted gross income. Other strategies that need to be utilized by year-end include charitable deductions and tax loss harvesting.
Review Your Withholding
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Continuing with the tax theme, this is a great time to think about adjusting your withholding if you haven't done so recently. If you got a big tax refund this spring, you may want to consider decreasing the amount withheld. Not only will this leave you with more money in your paycheck, but you may still receive a refund when you file next year (albeit a smaller one).
On the other hand, if you had to write a large check to the IRS, you may want to have more withheld from your paycheck, although this will result in a reduction in your take-home pay.
Remember: As tempting as "set it and forget it" can be, it may not be the shrewdest of financial planning philosophies. Take the time to think about your financial plan today and the steps you can take to better ensure you're in a position to prosper throughout the rest of the year.
By Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of "Your Money" on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com . Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
