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Jul 28, 2021

Mel's Money Minute: Mid-Year Financial Review

Mel's Money Minute: Mid-Year Financial Review

Mid-Year Financial Review

It’s that time of year again! How are those 2021 resolutions going? Or are you thinking, “What goals?”. Either way, we are here to remind you of the mid-year financial check-up! When you reflect on your finances for this year, what sticks out to you? Have you spent more this year compared to last year? We’re sure you aren’t the only one. We are all making up for lost time, but we must remain cognizant of our financial behavior. Conducting a mid-year financial review can seem intimidating and sometimes the hardest step is the first, so we’ve brought you five tips for conducting your mid-year financial review.

1. Be Honest About Your Spending

Reflect on your expenditures from the past three months; this doesn’t mean you have to go through your credit card statement, but we encourage it. Simply think about any big-ticket purchases you’ve made since the beginning of the year.

Did these purchases fulfill a need or a want? Did they increase your standard of living? Were these purchases easier to make because you weren’t eating out or spending money elsewhere? Evaluate if you made these purchases to make yourself feel better, or if there was truly a necessity to be filled.

If you find yourself making purchases to fill emotional needs, take this as an opportunity to speak with a spouse or a friend about helping to hold you accountable. Work together on setting guidelines for your spending that will help control impulsive spending.

2. Prioritize Your Emergency Fund

An emergency fund is an amount of savings reserved for unexpected emergencies such as vehicle repairs, medical bills, or loss of income. This reserve can be kept as physical cash, or set aside in a savings account, checking account or Roth IRA. Regardless of your circumstances, we recommend that everyone prioritize building their emergency fund as we continue navigating the COVID-19 crisis.

Our advice is to save three months of expenses if your household has two income sources, and six months of expenses if you have one income source. Start at what is comfortable for you and build from there. “Expenses” should include household costs that would not stop if you were to lose your job. These expenses include your rent/mortgage, essential utilities, groceries, insurance, transportation, etc.

3. Check Your Tax Withholding

Your withholding is the amount of taxes that are taken out of your paycheck every pay period. When you calculate taxes at the end of the year, the amount your withholding is applied to the amount due. It is essential to conduct a withholding projection for 2021 and see if you are on track for a refund or tax due. Be careful with the amount of the return- if it is a large amount, you may want to adjust your withholding; otherwise, you are basically giving the IRS an interest-free loan.

You can adjust the amount of income tax withheld from your paycheck by updating your Form W-4 provided by your employer. You may use the IRS withholding calculator (https://www.irs.gov/individuals/tax-withholding-estimator) to project your refund or tax due for 2021.

4. Check Your Credit Score

Checking your credit score is a soft inquiry, so it will not lower your score. Use any of the three major credit bureaus (Experian, TransUnion, and Equifax) to obtain a free report. If your score has dropped, review your credit report in detail. Are there any errors that you need to contest? Take the necessary steps to fix your score today.

5. Plan for the Holidays

Now is the time that we all wish we would have started Christmas shopping instead of frantically searching Amazon for a gift for Aunt Sue. Well, here is your friendly reminder! If things are financially tight, consider a gift exchange where you are only responsible for a single-family member. This approach can remind us of the true reason for the season. Holidays can be a stressful time, even though it should be a time for gratitude, so plan ahead so you can fully enjoy your holiday season.

It’s essential that we evaluate how our financial behaviors, good or bad, have evolved throughout the past few months. If they are good now, how are you going to continue down this path? What will you do to make sure you do not fall back into old habits?

Melissa Visbal, CFP®, CSLP®

Financial Planning Associate

Melissa came to Narwhal in the summer of 2018 following the completion of her master’s degree in financial planning from the University of Georgia, where she also earned her bachelor’s degree in consumer economics. Her interest in the field started with learning about consumer behavior, specifically its relation with complex moneymaking decisions. Melissa recently received her CFP® Certification in January 2021. Working with a CFP® professional can help you find the path to achieving your financial goals. Your goals may evolve over the years as a result of shifts in your lifestyle or circumstances such as an inheritance, career change, marriage, house purchase , or a growing family. Melissa is here to help you through that process. When she’s not working, Melissa enjoys cycling, cooking, and spending time with her beagle and two nieces.

Let’s start the conversation.

At Narwhal Capital Management, you’re more than just a portfolio, and it’s not all about the numbers. Let’s start with a meeting about your needs and future goals.