The first half of the year has been hectic and now is a good time to assess where you are with your current financial plan. In this third in a series of articles, we focus on the things that can help you stick to a solid financial roadmap for the next three months.
ABOVE ALL, ENJOY THE SUMMER!
The stock market has been on a roller coaster ride and inflation dominates the news cycle. None of these developments are likely to put you in a good mood, but none are likely to affect your long-term financial plan. Give yourself some space to ignore the noise.
July happens to be one of the few months of the year when not much happens, from a financial or tax planning perspective. So get out there and enjoy the summer weather and the long sunny days with your family and friends. Do that spontaneous long weekend you’ve been keeping in mind. To borrow from one of our favorite songs, “Live the life you love and love the life you live!”
And if you have time after enjoying some “me time”, mid-year is a great time to check your asset allocation in your long-term retirement accounts to make sure it is always aligned with your target stocks/bonds. to mix together. Stocks have been hammered lately while bonds have barely rebounded from their lows of recent months. Consider rebalancing your portfolio if an asset class has become too dominant due to recent strong performance. (Rebalancing means that you sell assets that have appreciated in value and invest in assets that have depreciated, so that you find the desired mix of stock and bond funds.) In addition, with the recent rise in the prices of everyday goods and services, it’s also a good time to see if you have enough inflation-hedge assets in your portfolio, especially if you’re retired or nearing retirement. retirement age.
PREPARE FOR BACK TO SCHOOL
Come back-to-school time, many families are hooked by deep discounts on clothing and supplies at department stores and discount stores. Instead of spending all that back-to-school money on shopping, consider setting aside education dollars in a college 529 savings plan or Education IRA. Although contributions aren’t deductible in a 529 account, earnings grow free of federal tax, and qualified withdrawals are free of federal tax (and more than 30 states offer full or partial tax benefits as well.)
But before investing in a 529 plan, investors should consider whether their home state or that of their designated beneficiary offers state tax or other state benefits such as financial assistance, funds scholarships and creditor protection that are only available for investments in qualifying states of this state. schooling program. State tax treatment may vary. Please consult your tax advisor before investing.
Additionally, a Coverdell Education Savings Account (ESA) offers tax benefits similar to the 529 plan, but limits contributions to $2,000 per year combined from all sources. If you contribute less than $2,000 a year, they can be simple to set up and manage. Keep in mind that there are progressive income restrictions when setting up the account and there are no inflation adjustments. In addition, the funds must be used before the age of 30.
PAY OFF THE DEBT
September 23 is the first day of autumn. Mark it in your calendar: Make it your personal goal to pay off any high-interest credit card debt before the leaves stop falling in Minnesota (usually late October in central Minnesota and the Twin Cities, Utah). in case you were wondering). Interest rates have climbed, and with inflation on the way, your purchasing power may erode if you’re paying debt service on high-interest loans. Remember that paying off a credit card that charges 15% is like getting a 15% return on the stock market (not many investments are generating those kinds of returns these days).
KEEP A CLOSE EYE ON SPENDING
Everyone is tightening their wallets these days, as the prices of groceries and gas to fill up your car reach nosebleed levels. If your expenses are suddenly higher than you budgeted for the year, you need to track your expenses to see where it’s all going. If you’re able to keep your expenses flat but grow your income even at a moderately steady rate over time, that’s a surefire way to build a comfortable nest egg. Look for ways to cut costs before inflation starts to affect your lifestyle, and consult with a financial advisor on ways to set and maintain a budget.
The opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations to any individual. Investing involves risk, including possible loss of principal.
Bruce Helmer and Peg Webb are financial advisors at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at [email protected]. Securities offered by LPL Financial, member FINRA/SIPC. Advisory services offered by Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.