The recession and ongoing economic pressures have forced many consumers to
handle their personal finances in a different manner than they have before.
With the changes that have occurred in the economy, consumers now have a better
sense of budgeting and saving during more challenging times. This is a good
time of year to review your finances and make adjustments that will help you
increase your financial security by the end of 2009. Here are some ways to
perform a mid-year financial review:
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Determine how much debt you have and what you need to do to lessen the burden.
Paying down debt will free up cash to put toward other areas and help you
achieve greater financial security. If you notice that you’ve been spending
more than you make, find the areas that you can cut back, such as certain
utility and transportation expenses.
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Take note of the credit cards you have and how often you’ve been using them.
Review the balance amounts, in addition to the fees and interest that you are
charged. Consider factors such as the minimum payment you are required to make,
how the company calculates the finance charge, and circumstances when the
credit provider can change agreement terms. If you carry balances on high-rate
credit cards, look into obtaining a low-interest credit card and transferring
your existing balances. Dedicate a certain amount each month to pay toward the
balance, and try to avoid new charges.
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Review how much money you have saved since the beginning of the year. It is
important to set aside a certain amount each month in case of an emergency. Try
to save at least three months’ worth of living expenses in an account that you
can access if necessary. To help you save on a consistent basis, allocate a
portion of your paycheck to go into a savings account through a direct deposit
set-up. You may want to look into putting a certain amount into money-market
funds that typically pay higher returns than savings accounts.
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Take advantage of any financial opportunities that you may not have been
eligible for in the first half of this year, such as your employer’s 401(k)
plan, in which you are allowed to make pretax contributions and may receive
matches from your employer on a portion of your contributions. If you're
already participating, consider increasing your contribution. If a 401(k) isn't
available to you, consider opening an individual retirement account (IRA). In
general, contributions to and income earned on traditional IRAs are tax
deferred until retirement. Roth IRA contributions are made after taxes, but
earnings can be withdrawn tax-free upon retirement.
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Analyze your insurance policies starting with your health insurance policy. If
you’re not covered under a group plan, see if you can join any trade
associations, which often offer group rate policies. Or, obtain quotes on
individual policies by calling the major insurers in your state. Life insurance
policies should also be reviewed and updated if changes have occurred to your
dependents or beneficiaries. Disability insurance will replace a portion of
your income if you can’t work for an extended period due to illness or injury.
If you can’t get this through your employer, check with individual insurance
companies to compare rates.
When you perform a mid-year financial review, you can better determine the
steps you need to take to improve your finances in the second half of the year.
