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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)


Get a Bigger Return on Your Tax Return
with a Mid-Year Financial Checkup

Personal Financial Management is a Year-Round Job


Did you have any unpleasant surprises when you filed your tax return this year? Do you have any important financial goals for the future?

“Don't just file your tax return in the drawer for another year,” says Hal R. Terr, CPA, a senior tax manager at WithumSmith+Brown in Princeton. “You have all of your records assembled in one place, now is an excellent time to review your investments, make sure you have sufficient tax withholding and plan to benefit from tax advantaged programs for education and retirement savings.”

Additionally, while you’re reviewing your records, you can take a hard look at all your other financial goals. With half the year gone, where do you stand? According to the personal financial planning experts at the New Jersey Society of Certified Public Accountants (NJSCPA), a mid-year financial review will provide you with the insight you need. Here’s what to consider.

Get a Grip on Your Goals

Whether you’re saving for a down payment on a house, a new car or a college education, it’s important to monitor your progress. If your goals aren’t specific, you’ll find it’s difficult to judge how you’re doing. If you set a vague goal like resolving to “save more in the New Year,” put a more definitive plan in place now, for example, to save $250 a month in a 529 College Savings Plan. To improve your chances of meeting your goal, set up automatic transfers from your paycheck or checking account to a savings or investment account.

Tally Your Taxes

Did you get a big refund or owe a big chunk of money this past April? Now is a good time to make sure the same thing doesn’t happen next year. Project your taxes for 2007 and make a mid-year correction by changing how much is withheld from your paycheck. To reduce the size of your refund, increase the number of allowances you claim on your W4 Form. Reverse the strategy if you owed a large sum to the IRS. Self-employed workers can adjust the amount they pay in estimated taxes to meet their projected tax bill.

Battle Your Budget

If you followed through on your resolution to better track where your money goes, take a look at your spending over the last six months to see where you should make adjustments. Check your household budget as well to determine whether you need to revise your categories or adjust your numbers.

Revisit Your Retirement Savings Plan

Many 401(k) retirement plans give employees the option to change their deferral election at mid-year. If you’re not contributing the maximum – or at least enough to get the full company match – take a look at your budget and see whether you can increase your contribution. For example, if you recently received a raise or expect one soon, that money can be used to increase your contribution level.

Examine Your Emergency Fund

Did you tap into your emergency fund during the first half of the year? If you haven’t replaced the money you spent, put a savings plan in place today to bring your emergency fund back to its original level. Most CPAs suggest that you have enough money in your emergency fund to cover six months of living expenses.

Investigate Your Investment Plan

Allocating your investments across the three major asset classes – stocks, bonds, and cash equivalents – is the key to successful investing. Take a look at your asset allocation and do a mid-year rebalancing if one class in your portfolio performed very well or very poorly.

Fine Tune Your Fringe Benefits

Many companies hold open enrollment sessions for benefits in the fall. This makes summer a good time to start thinking about your needs. If the information is available from your employer, research and review your choices now so you don’t need to rush through the exercise when the enrollment window opens.

Hone in on the Holidays

If you don’t plan ahead, expenses associated with the holiday season can wreak havoc on your finances. Come up with a holiday budget now, and use the next six months to save what you’ll need.

Contact a CPA

With the tax season over and year-end tax planning a ways off, now is a great time to seek the help of a CPA in completing your mid-year review. The changes you make now can make the difference in achieving a successful 2007.

Securities offered through 1st Global Capital Corp., Member NASC, SIPC
Investment advisory services offered through 1st Global Advisory, Inc.

If you would like to receive more information on various financial matters, subscribe to E-CPA, the NJSCPA's free, monthly email newsletter. To subscribe, visit www.njscpa.org/finances or email a subscription request to e-cpa@njscpa.org.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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