As we reach the midway point of the year, it’s an opportune time to conduct a financial check-up to ensure you are on track to meet your goals and make any necessary adjustments, if needed. This mid-year assessment allows you to evaluate key areas such as retirement contributions, debt management, emergency funds, spending patterns, and tax planning, including contributions to flexible spending accounts (FSAs) or health savings accounts (HSAs) while keeping track of medical expenses. By examining these aspects, we can make informed decisions and take proactive steps for success in the second half of 2023.

  1. Year-to-Date Retirement Contributions

One of the primary figures to review is retirement savings. Start by reviewing your year-to-date contributions to your retirement accounts, such as 401(k)s, IRAs, or pension plans. Determine if you are maximizing your contributions and taking advantage of any employer match programs. If you find that you are falling behind your target savings, this is a good time to consider necessary adjustments.

Below is a chart of the average and median 401k balances by age. While the savings amount needed differs for each person and their plan, it is good to compare overall averages to see where you stack up.

(Source: GoBankingRates)

  1. Debt Management

Debt can be a significant obstacle to financial stability. Take stock of your outstanding debts, including credit cards, student loans, mortgages, or car loans. Evaluate your progress in paying them off and calculate the interest rates associated with each debt. Devise a strategy to accelerate debt repayment, such as focusing on high-interest debts first or considering debt consolidation options. Minimizing your debt burden will not only improve your financial health but also free up funds for other important goals.

  1. Emergency Fund

The importance of an emergency fund cannot be overstated. Assess the status of your emergency fund by examining its balance and determining if it is sufficient to cover at least three to six months of living expenses. If your emergency fund falls short, redirect some of your savings towards it until it reaches the recommended level. A robust emergency fund provides a safety net during unexpected situations, such as job loss or medical emergencies.

  1. Year-to-Date Spending

Tracking your year-to-date spending is essential to maintain control over your finances. Review your spending patterns to identify areas where you might have overspent or opportunities for saving. Categorize your expenses into essentials and non-essentials and analyze which areas can be trimmed or eliminated. This exercise will help you reallocate funds towards your financial goals, such as debt reduction or retirement savings.

Banks and credit card companies have made this much easier to review as many of them provide tools showing how much you have spent and your categories of spending.

  1. Tax Planning: FSA or HSA Contributions and Medical Expenses

Mid-year is an excellent time to assess your tax planning strategies. If you have a flexible spending account (FSA) or health savings account (HSA), evaluate your contributions and estimate whether you are on track to fully utilize these tax-advantaged accounts. Maximize your contributions to take advantage of pre-tax savings for medical expenses.  To review the annual limits for each, you can click here.

Additionally, ensure you are tracking your medical expenses throughout the year. This information will be valuable during tax season, as you may be eligible for deductions or credits related to medical expenses. Keep all relevant receipts and statements organized for easy reference when filing your taxes.

A mid-year financial planning check-up is a great exercise for making sure you are hitting your goals for the year. By examining your year-to-date retirement contributions, debt management progress, emergency fund status, spending patterns, and tax planning strategies, you can make any necessary adjustments to get back on track and continue to optimize your planning for the year.

Presented by the Financial Planning Committee of Lake Street, an SEC Registered Investment Adviser The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.