Midyear Financial Checkup: 5 Essential Steps to Stay on Track

Midyear Financial Checkup: 5 Essential Steps to Stay on Track

In this episode of The Retire Early Retire Now podcast, host Hunter Kelly, a certified financial planner and founder of Palm Valley Wealth Management, emphasizes the importance of a midyear financial checkup. He outlines five essential checklist items: 1) reviewing goals and progress, 2) checking cash flow and budgeting, 3) evaluating tax strategies, 4) rebalancing your portfolio, and 5) maximizing retirement contributions. Kelly provides detailed insights and actionable advice for high-income earners to ensure they remain on track to achieve their financial goals. He encourages listeners to reassess and adjust their financial plans to avoid costly mistakes and optimize their financial health.

00:00 Welcome to The Retire Early Retire Now Podcast
00:18 The Importance of a Midyear Financial Checkup
01:21 Review Your Goals and Progress
04:38 Check Your Cashflow and Budget
08:36 Evaluate Your Tax Strategies
11:05 Rebalance Your Portfolio
13:58 Maximize Your Retirement Contributions
15:52 Final Thoughts and Encouragement
18:52 Disclaimer and Professional Advice

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Transcript

0:00

And welcome back to The Retire Early Retire Now podcast, the show where we dive deep into financial strategies that help high income earners achieve financial freedom sooner. Live better and take full control of their retirement. I'm your host, hunter Kelly, certified financial planner and founder of Palm Valley Wealth Management. We're halfway through the year, and now is a perfect time to do a financial checkup. Just like you go to the doctor for physical or take your card to get an oil change, your finances deserve the same type of attention. In today's episode, I'm going to walk you through five essential checklist items that will keep you on track. Uncover new opportunities and help you avoid costly mistakes heading into the second half of the year. So whether you're listening, in your car on a run, having a cup of coffee, sit back and hopefully you'll gather some great information to help you stay on track for the rest of the year. If you like this podcast, go ahead and. Leave a five star review or share this with a friend. Again, this helps the podcast grow tremendously. My goal is to help people retire early and become financially independent. And the best way to help me do that is to share this podcast with a friend to help them do the same thing. So let's jump right into it. Number one, review your goals and progress. And I love doing this and starting out from a 30,000 foot view. start by zooming out. Have the end in mind where we want, where do we want to be at the end of the year, right? So. Were you planning to save a certain amount? Were you planning on paying off debt? were you, wanting to max out or fund a certain retirement account or build a brokerage account, make a large purchase? What was the goal? And now, once you remember that, maybe you wrote it down somewhere. Put it in your computer, have it on the, your screensaver on your phone, whatever that may be. take a look at it and where am I? and so I love these half or midyear. reviews because again, the more you measure something, the more you review it, the more it's in your face and in your, your conscience, the more you're going to spend more time on it to dedicate time to achieve these goals. this midyear review is a great thing to do. Now, if you feel like, Hey, it's been six months, maybe I haven't made the progress that I thought I would make. Well try breaking those goals or the reviews down into maybe quarterly check-ins, even monthly check-ins. had a review with a client a few, months ago, and they said, Hey, hunter, we're just not in the spot that we thought we would be. mainly because of budgeting is their, particular pain point, and Uh, in my firm, I like to do this a lot with clients, especially if they have, spinning habits that don't necessarily align with their goals. We'll do a more regular check-in. So we will check in maybe once every month or once every eight weeks, something like that. I. And we'll really kind of just, and it's a quick check in. Hey, how's the budgeting going? Or how's this goal going? How's that go? Goal going? what are we doing to get there? What are the things that we've done over the last four or 5, 6, 7 weeks, to help meet these goals? Right? if you're having a hard time keeping, steady progress. Then break those goals. And this is not any, anything groundbreaking. It's just a good reminder. Break those goals into more frequent check-ins. where again, it's at top of mind, right? once we kinda again, assess those goals, where have we made that progress? Then we can start to make adjustments. Uh, is this goal still realistic? Does it make sense? Am I going, am I on track? Am I above, where I thought I would be? as far as dollars amounts or however you're measuring? what can I do to kinda get back on track? Where, where am I at? Right? And so that would be number one. Hey, look at a 30,000 foot view. Where are we at? am I still on track? Am I ahead of tr am I ahead of my goal? What does that look like? And if I'm having trouble, sticking to it or remembering to do certain things. Break it down, and make it, make it a weekly thing if you really need to, right? or maybe you need to hire somebody. maybe you need to hire a financial planner that can help you stay more accountable, things of that nature. Again, that's what we do at Palm Valley Wealth Management, but you could hire anybody that you, you would like or trust. Number two, check your cashflow and budget. And again, I just mentioned the budget, right? This is the thing that you'll probably have to reassess the most often, right? Especially if you're new to, uh. And financial goals and things of that nature. I am a big proponent of the pay yourself first method, right? The paycheck comes in and then depending on how you're paid and how consistent that number is, you can either do a dollar amount or a percentage amount. So if your income fluctuates, you would use percentage amounts of what I'm about to talk about. Or if it's a consistent paycheck every two weeks or biweekly, whatever that may be, then you can start using dollar amounts, but. We wanna make sure that we're allocating to our needs, our goals, and retirement and things of that nature first. And then whatever's left over can be, what I like to call my walking around money or I spending money, that's, that's outside of those goals. So now that we're, we're paying ourself first, we're achieving those goals first. But, again, sometimes that takes, a while to get used to. And if you're not used to that type of budgeting, you may need to go to something like an EveryDollar method, like the Dave Ramsey method and really dive into what exactly I'm spending my money on. So I know one, can I cut some expenses like we talked about last week and, and last. the last episode, are there subscriptions I need to cut or, certain things I can cut outta my budget, to help me get back on track to this initial goal that I set earlier in the year? Right? So, are there expenses that, are my expenses still aligned with the goals and values that I've set out? Are there any new subscriptions that snuck in that I'm not using? Maybe I signed up, for a gym subscription in early January. is the, kind of the cliche example, am I not going to that gym anymore or am I not using that fitness app, whatever that may be. Did I buy a Peloton that I'm not using anymore? can I sell it and get rid of the, the Peloton subscription, whatever that may be for you? That's a good idea. Just to go back and reassess that cash flow. did I save more? Right? And it doesn't always have to be negative, did I, did I not end up not spending as much? Right? And so now I'm still, on track for my goals, and I can either take that extra cash flow that maybe I saved in my emergency fund or my savings account, and put that toward achieving that goal faster. Or I can just increase my lifestyle a little bit more, maybe go out a little bit more or spend on, some things that maybe I wouldn't have because, I, I didn't realize there was much, as much cash flow as I thought, right. having a, a quick look at your budget or your cash flow every few months, every, every half year, can really make a difference on. Making sure that you are, staying on track. And again, you don't need to count every penny, but high level awareness of where your money is is going to be powerful. So freeing up,$500 a month because of subscriptions or whatever that may be, gives you, an extra$3,000 the rest of the year, to meet those goals or, or having a little bit extra money to, to do things right. And so high income earners often skip budgeting because again, cash flows. Cash. Cash flow is high, right? I'm getting$10,000 a month or$20,000 a month. I'm never spending. That much, but maybe you're spending too much to meet the goals that you set, right? And so everybody's situation's a little bit different. So you can make small tweaks now, and not get toward the end of the year and go, oh, I didn't save enough for, for this Christmas present. I was, you wanting to get my kids or vacation or, or whatever that may be, right? So we don't wanna get to the end of the year and go, oh, I didn't, I didn't reach this goal. And it could have been something as easy as just checking in. late June, early July, for those, for those goals, right? So number three, this is really something high income earners, especially business owners should be taking a look at. So evaluating your tax strategies. So again, this is where I think, Palm Valley Wealth Management, exceeds, a lot of financial planners, is we're really dialed in all in taxes. And so midyear is a great time to run projections for your tax liability, especially if you're a business owner. If you've been making your quarterly payments, maybe you're having a great year, maybe it's a better year than you thought, right? And so do I need to adjust my withholding or my quarterly payments because I know that I'm, I'm making more than I thought, right? Or, or maybe it's the other way around, right? do I need to. Uh, to adjust in the sense that maybe I don't need to pay as much in right. and so you really need to take a look at that and go, okay. Well, what are some things that I can start to do now because I'm making way more, uh, whether that be SEP contributions or, or solo Ks or getting ready to implement a 401k because of the business is, is going crazy. or do I need to withhold more through my paycheck because I, I got a large promotion than I wasn't expecting? whatever that may be, we should be assessing. what I'm gonna owe the IRS come April 15th, 2026, so that I don't get surprised with a large tax bill and potentially underpayment penalties, right? think about, Other things such as Roth conversions. So again, if maybe for whatever reason your, your income has slowed down quite a bit, whether that be voluntary or not, this could be a good time to think about, Roth conversions as well. on the, on the other side of that where, where income may dip and then. this, this is probably a little too late now that the market has kind of recovered, but, are there some tax loss harvesting? So if you do have some single holdings that just haven't done well, up until this point, is there an opportunity to, in a brokerage account, sell those holdings, capture a loss, and then get back into it if you're still felt good about that particular stock? or should we just cut our losses and go to. another holding that we feel better about. Right? and again, the market's recovered, so maybe there's less opportunity of that now, but it's always a good time to take a look at those brokerage accounts and go, ah, can I take advantage of this some way somehow? Right. next thing is number four. Rebalance your portfolio. So to kind of tack on to that, tax loss servicing the market has been crazy this first half of the year. especially in your retirement account. Sometimes 401k providers don't do automatic rebalancing. So depending on what, your holdings are in there, sometimes, or a lot of times you may have a target date fund and they'll rebalance on their own. But if you mainly pick the particular mutual funds or ETFs inside of your 401k. Or employer plan, and you didn't set up auto rebalancing because the market was so volatile in the first half of the year, your allocation may be much different than what you thought it would be. Or what you initially, selected it as. this is a good way to go ahead and, and sell some of those winners, buy some of those losers or those, less performers. So buy or sell high. Buy a low and get back to that original allocation that you had set forth to yourself, either earlier in the year or maybe even prior to that. So you can lock in some gains and then reinvest into undervalued areas, and maintain alignment in, the particular portfolio that, you set out. And. To have in the first place. You can also look at tax location. So we talk about tax location a lot. This is kind of a, a industry jargon. So do I have the proper amounts going toward, Roth versus pre-tax versus after tax? So are your bonds sitting? I. in your taxable accounts instead of IRAs. So are you receiving interest that's going to spit out a significant amount of tax that maybe you could have that into your IRAs or 4 0 1 Ks, and put in some equities into your brokerage accounts and avoid some of those taxes, now, to be a little bit more tax efficient. So are you taking advantage of, Of this tax location. So another question you could ask yourself is, are you taking advantage of tax efficient equities or ETFs, inside of your brokerage account? So again, we talk a lot about that with, direct indexing and, and not using mutual funds, and using ETFs instead, uh, in our brokerage account. So again, we want to be as. tax efficient as possible in those brokerage counts, especially if we're a high income earner. So rebalancing once or twice a year is often enough for most investors, but not doing it all, that's where you invite risk or missed returns. Again, you want to make sure, one, you don't wanna get, too much risk on the table, especially if you're a more conservative investor. and so. Making sure that you rebalance, can help that portfolio stay in the proper risk tolerance or, proper risk tolerance that you set out to have. Number five, maxing out your 4 0 1 ks, 4 0 3 BS 4 57. It doesn't necessarily have to mean maxing out, but taking advantage of things like the match and understanding where you're at. So if you, if you started at number one, you said, Hey, I'm actually saving more money than I thought I. would, and I feel comfortable increasing my contribution to these different account, different accounts. Then, you may wanna look at and say, okay, what are the limits for 2025? I. maybe I can, I was already close to the max. Maybe I can go ahead and increase my contribution to meet that max of 2020, 23,000. if you are, obviously under age 50, and then if you're over age 50, it would be$30,500. and there's some extra stuff there, in your early sixties as well for extra ketchup. But, making sure that you're taking advantage of. Those particular retirement accounts, especially if you're ahead of schedule. and then also don't forget your HSA contributions. Again, that is a triple tax free, account if you use it for healthcare. you could get that money in there, pay for some health, healthcare out of pocket, invest that money and really start to grow that account. And, that would be a key. to retiring early to help pay for healthcare. Again, that is something that, stops a lot of people from retiring early is healthcare. So adding to the HSA, making sure that you max it out. And starting to grow that account can make a big difference on whether you retire at 55 or 65, depending on if you're planning for healthcare costs and things of that nature. For high income earners, now is a great time to start looking at backdoor Roth IRAs, or mega door mega backdoor Roth contributions as well if your plan allows it. So again. There's a, there's a lot of good stuff here. the biggest takeaway from this episode is, Hey, where am I at, or where did I want to be at the end of 2025 when I made this particular goal? At the beginning of 2025 and where am I at now? And that will tell you what adjustments you need to make. Is it, Hey, I need to reign in my spending. Or, oh, I've been having a great year. I'm gonna get killed on taxes. what can I do to start alleviating some of those things?'cause again, you don't want to get to December, and you've had a great year and there's nothing you can do other than maybe contribute a little bit more to a retirement plan. to mitigate some of these taxes, right? And so what are some things that I can do now? and then from an investment standpoint, again, this year has been fairly volatile, especially early on, making sure that the risk, that we want to take is still, our, our portfolio still makes sense for the risk that we want to take, right? again. Review those goals, check your progress. That's the biggest thing, the biggest takeaway from here. and that'll help you make those adjustments of cash flow or spending habits, checking on taxes or maybe I need to rebalance my portfolio. And then making sure that you're still on pace for your savings needs, whether that be through retirement or through brokerage accounts, or maybe just a family vacation you want to take next year, whatever that case may be. So doing these things now will give you time to make adjustments and avoid. That end of year panic that we don't want to experience. I've been there, a lot of my clients have been there, which is, probably one of the reasons they hire me is they want to stay ahead and stay proactive of these things. So if you're unsure about how to apply these per to your personal situation. or if you just have trouble staying accountable to yourself or, you, and you and your spouse have trouble staying accountable to each other, especially in financial, settings, then you can always come to my website, Palm Valley wm.com, get a second opinion about your financial situation. I would love to help you guys. would love to, to, spend some time with you. That first call is always no cost. and if we can work together, great. If not, hopefully you get some good education, about your situation that could help. So, as always, if you enjoyed this episode, please leave a five star review. Or share this with a friend again, I want to be able to help people retire early and become financially independent. And the best way to do that. So share this podcast.'cause you share it more people hear it, and your friends, again, they'll become financially independent. You'll be financially independent. You guys can go do things that you care about and value together. nobody wants to do things alone. And so the more people that are financially independent, the more things you can do with those people that you love. So till next time, look forward to, next episode. And again, as always, we'll see you in the next one. This podcast is for educational purposes only. It is not meant to be financial or investment advice. Do not make decisions solely based on this podcast alone. Please seek a professional when making those considerations about your own specific situation, and please keep Palm Valley wealth management in mind when making those considerations.