It’s been a difficult few months and an unquestionably difficult year for most of us so far, but that doesn’t change the fact that we are in mid-2020 and it is time to take a closer look at your finances. Here are some moves you need to make so you can see your money position and how you can take steps to improve well before the end of the year.
1. Evaluate your investment portfolio
It is always a good idea to have a well-diversified portfolio, especially now that we are in recession. But aside from current economic conditions, your portfolio should contain a combination of stocks and bonds (ideally much heavier on the former if you’re young enough), and within the stock category, a number of companies from different industries. That way, if, for example, the car stock tank at one point this year, but only comprises 8% of your portfolio, it won’t burn too much.
Image source: Getty Images.
See what your holdings look like, and if you’re not satisfied with your investment mix, swap some assets. (Right now is a good time to do so as the stock market has largely recovered its value from its lows in March.) Another way to instantly diversify is to load index funds, which track existing market indices in an effort to match their values. performance. Buy a S&P 500 The index fund, for example, allows you to effectively invest in 500 different stocks at once.
2. Review your retirement plan contributions.
In 2020, you can contribute up to $ 6,000 to an IRA if you are under 50 or up to $ 19,500 to a 401 (k). If you are age 50 or older, these limits increase to $ 7,000 and $ 26,000, respectively.
Many people have lost income this year due to the COVID-19 crisis, and if that’s your situation, you may be behind in your retirement plan contributions, and it’s understandable. But if your income has been stable or you have been out of a job but have found a job since then, it’s worth taking the opportunity to put money into your IRA or 401 (k).
You may not have the ability to reach the aforementioned limits, and that’s fine. But that you should The goal is to save 15% or more of your earnings for the year if your finances allow it. And if you have a 401 (k) through work, you should at least contribute enough money to hook your employer entirely.
3. Do some tax planning
At this point in the year, you may have already filed your 2019 tax return (due July 15), and if not, you’re probably preparing to do so. As you take that step, you should also take the opportunity to do smart tax planning.
Take a look at how your 2019 taxes have decreased. Is a large refund due to you? If so, you may want to adjust your withholding so that less tax is deducted from your paychecks for the rest of the year (assuming your income is comparable to last year). Or you may have to do the opposite: If you owe a lot of money to the IRS for 2019, you may need to have plus Withholding tax on this year’s earnings to avoid a large underpayment.
Right now, many people focus on simply going physically and emotionally unscathed until 2020, so financial planning may be the last thing you can think of. But if you make the above moves, you will prepare to end the year on a financially healthy note, and that is reason enough to make the effort.
