A midyear personal finance checkup will help in getting you to the finish line
NEW YORK — If you had hoped to do a midyear checkup on your personal finances, there’s still time to make sure you’re ready for the rest of the year. Here are five places to start:
1. Spending — Take a look at your spending plan from the beginning of the year and compare your cash flow for the first six months. Did you allocate enough to cover expenses, or are you falling behind in certain areas?
Or did you skip the important step of budgeting to begin with?
“Solid financial planning starts with a having a budget,’’ said Paul Golden, spokesman for the National Endowment for Financial Education.
There are plenty of tools available to help, from personal finance management programs on your bank’s website to applications for smartphones that can track each penny you spend. Pencil and paper also still work. The key is to put a plan in place and stick to it.
2. Savings — There are signs that the interest in setting aside cash for emergencies and short-term goals is waning after a brief boost last year. Yet even just a small amount of savings can play an important role. The Consumer Federation of America found that with just $500 in the bank, you’ll sleep better and will be more likely to avoid high-cost borrowing and nasty fees for overdrafts.
It’s not just an emergency fund that requires savings. If you’re hoping to be generous during the holiday season, start setting aside cash to fund it now.
3. Debt — Consumers have been paying down their debt, and banks have been writing much of it off.
But there’s still plenty of debt piled up. Carrying high debt loads can have a big impact on your credit score, make monthly budgeting more difficult, and leave you more vulnerable in emergencies. The first step toward solving these problems is to stop using plastic and chart a plan for paying off your cards. Don’t be afraid to seek help from a nonprofit credit-counseling service.
4. Taxes —There’s a lot of uncertainty for people who try to plan for taxes this year, because Congress has not yet addressed a number of expired tax laws.
Tax rates are expected to go up for all but the lowest income brackets in 2011, which may make this the right year to sell some investments or give gifts to children or grandchildren.
5. Retirement — One of the biggest blunders Atlanta financial planner Cass Chappell sees among his clients is not contributing enough to a 401(k) plan to meet the company’s match. A close second is contributing so much that you reach the maximum allowable too early in the year, and miss out on company matches for the remaining months.
A retirement plan review starts with your 401(k), but it doesn’t end there. It includes Social Security and company pensions, as well. “It’s important to go through the process, to figure out what money you need to provide for yourself, and then to put a plan together,’’ he said.
Eileen Connolly is a personal finance writer for Associated Press.