Checking in on Your Financial Health

Jul 2022

This has been a rough period for investors given the stock market performance the first six months of the year. However, successful investors take these downturns in stride. Bear markets occur roughly every 7 years on average, but they do not need to be a roadblock to your long-term financial success.  As such, this is an excellent time to check in on your financial goals and make sure that you are still on the right track.

It makes sense to review the following at least twice a year and adjust accordingly:

  • Budget/Emergency Fund
  • Retirement & Health Savings Account Contributions (Pre-Retirees)
  • Rebalance Your Portfolio
  • Outstanding Debts & Credit Report
  • Tax Situation
  • Estate Plan

Having a budget, especially in retirement, is especially important to your financial health. The first step is creating a budget, if you do not have one already. Then, compare your expenses to your budget year-to-date. Given the inflation we have all experienced, it should not come as a surprise to be running a bit over relative to your planned expenses. You may need to ask yourself whether adjustments can be made to bring expenses in line or whether your budget needs to be expanded, which may have an impact on your discretionary spending or savings goals. Part of your budget may be allocated to funding an emergency fund. Everyone should have an emergency fund representing three to six months of expenses that can be relied upon in the event of job loss or other unforeseen events. Retirees can err on the shorter end of that range (three months) since they do not have to worry about job loss.

Retirement contributions are the foundation to long-term savings for most. Generally, one needs to save 10% to 15% of their yearly income toward retirement during their career to build an appropriate nest egg that can be used to supplement Social Security. Most workers today do not have a pension, so they will need to rely on Social Security and what they have accumulated in their investment portfolio. If you are not deferring enough to receive the full company matching contribution, you should increase your contributions to a level that takes full advantage of that benefit. And given that stock prices are “on sale”, this is an excellent time to increase your contributions toward employer savings such as 401(k), 403(b), etc. Keep in mind the maximum you can defer into a 401(k) for 2022 is $20,500 ($27,000 for those over age 50).

If you have maximized your 401(k) contributions and still have additional room in your budget for savings, Roth IRAs are an excellent vehicle as they provide tax-free growth for retirement. The contribution limit for 2022 is $6,000 ($7,000 for those over age 50). Also, keep in mind that eligibility for Roth contributions phases out for married couples at an income level of $204,000 to $214,000.

Many employers now offer Health Savings Accounts to help employees pay for medical expenses. Money distributed from an HSA is tax-free when used for medical expenses and can be carried forward until needed. Here again, you should review your typical out of pocket health expenses and increase contributions where possible, to help offset them. The family contribution limit for 2022 is $7,300 ($8,300 for those over age 50).

When it comes to your portfolio, this is not the time to abandon your long-term strategy because your portfolio is down in the short-term. However, it is an excellent time to rebalance. Certain areas such as US Large Cap Growth have fallen significantly more than other areas and are underweight relative to your goals. Even though bonds have lost money this year, they have held up better than stocks and are likely overweight. Disciplined rebalancing allows investors to take advantage of the volatility of the market by adding to areas that have declined while drawing from other areas that have held their value better.

The only good debt is a home mortgage. However, it is not uncommon to let credit cards or other revolving debt persist. You should prioritize paying down these debts and use excess cash flow (not your emergency fund) to pay them down as soon as possible, starting with the highest rates first! As you review your debt picture, it is important to also review your credit report. You are entitled to a free copy of your credit report every 12 months from each of the 3 credit reporting companies. To request your free credit report go to  With the increase in identity theft over the past decade, it is critical to be vigilant about monitoring your credit report as this is likely the first place you will see it if there is an issue.

A mid-year review of taxes is especially important when you have non-retirement accounts. These investments will be subject to taxes on dividends and capital gains distributions. Because the market is down year-to-date, this is an excellent time to look for tax-loss harvesting opportunities. If your investment is worth less than your purchase price, you can sell it for a loss and reinvest into a similar investment. Thus, you are not locking in long-term declines in portfolio value, but you can get a tax benefit from the decline. In addition, tax losses can be used to offset other gains you may have during the year. Any excess losses can be carried forward to be used in future tax years.

Lastly, it always makes sense to think about your estate plan. If you have an estate plan in place and there have been no major life changes, then you are likely in good shape. However, if there has been a death or marriage in the family, your estate plan may need a review and update. If you have not put together a proper estate plan already, now is the time to do so!

This may seem like an overwhelming list; however, these are critical steps to take to ensure you’re financial health is on track. I suggest breaking the tasks up over a few weeks as to not overwhelm yourself. Once you get into the habit of these best practices, maintaining your financial health will be much, much easier!


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