Did you make smart resolutions at the beginning of the year, such as getting your finances in order? Now that the year is half over, it’s a good time to check in and see how you’re doing. The Pennsylvania Institute of Certified Public Accountants (PICPA) offers the following advice on how to best size up your financial situation and make needed corrections.
Do Away with Debt
The average U.S. household credit card debt is several thousand dollars, according to a Federal Reserve analysis. That’s a sobering figure, especially when you consider the amount of interest that must be paid each month on outstanding balances. How have you done at lowering your credit card and other debt so far this year? If you aren’t completely satisfied with your progress, now’s a good time to move this goal to the top of your agenda. If you’re only paying the minimum balance, your first step should be to make the largest payments you can so that you can erase the balance sooner and free yourself from costly monthly interest charges. Make sure to target the account with the highest interest first. Here’s some added incentive: lowering your outstanding debt can help raise your credit score, which means you may reduce the interest rate you’re charged on future borrowings.
Think about the Future
Saving for retirement should be a common consumer goal, but unfortunately it’s also one that’s easy to put off. Don’t wait until it’s too late. The earlier you begin saving for the future, the more your money can grow over time. Many employers help out by offering automatic retirement savings plans that deduct an amount you determine from each of your paychecks. If your employer matches your contributions, then make it a high priority to set aside as much as possible to take advantage of the full match. If you don’t, you’re leaving retirement money on the table.
Get Back on Budget
Are you on track with your budget? If not, it’s not too late to get back on track! Your budget should track how much you make and how you spend your money. It’s easy to do, and it provides valuable information on how you use your hard-earned dollars. If you’re surprised at how much you spend on takeout, entertainment, or some other category, you may want to rein in spending in that area. Your budget should also include a set amount for savings. Even if it’s only a small amount at first, it’s smart to work on building an emergency fund or a nest egg for a future home purchase or other long-term goal. The sooner you start, the faster you’ll get there.
Update Your Will
A midyear financial review is a good time to update or create your will. This is especially important if you have kids, since you’ll want to name an executor and a preferred guardian who can ensure their needs are met in case of your death. Also, look at your life, health, and disability insurance to confirm that they are up to date and reflect your current situation and needs.
Get Your Just Rewards
Most people know to look for a credit card with the lowest possible interest rate, but some fail to seek out cards that also offer valuable rewards programs or to take advantage of the rewards they earn. If you’ve been using the same cards for years, this may be a good time to shop around for cheaper options with better rewards.
Turn to Your CPA
Midyear is also a good time to check in with your CPA to make sure you are doing the right tax planning and taking other smart financial steps. Contact your local CPA for answers to all your financial questions. To find a CPA in Pennsylvania by location or area of expertise, ask family and friends for recommendations or use the CPA Locator
Original publication date: July 21, 2014