This year is proving to be one of the toughest economic environments that we have faced in a long time. The U.S. economy, as measured by Gross Domestic Product was down 5.7 percent in the first quarter and the second quarter was probably just as bad. Unemployment was 9.7 percent in May and will most likely move into double digits for the remainder of the year. The good news is that the banking and financial system appears to have stabilized and the federal government has embarked on a long-term economic stimulus plan that is projected to lead the economy into positive growth either late this year or in early 2010.
Today is a great time to measure your progress toward the achievement of your financial goals and to make mid-year corrections.
Cash management
If you want to pursue your financial goals, it is imperative that you manage the major source of your potential wealth – your cash. Consider alternative ways to reduce expenses such as; buying clothes during seasonal sale periods, cooking meals at home, or using public transportation. If you have not setup a monthly cash-flow statement, use your last three months’ income and expenses to establish a baseline and then track it monthly.
Investment planning
The stock market, as measured by the Dow Jones Industrial Average, is about even for the year after taking a 20 percent dive in March. (Investors cannot invest directly in an index). It is still questionable whether the market has weathered the storm and is poised for a move upward or whether we will see a continuation of the current bear market. Review your most recent 401k, IRA and investment account statements. What has been their performance over the last 12 months and are your investments adequately diversified?
Tax planning
If you used a tax advisor in the past, consider meeting with your advisor to access your tax situation. Start by reviewing your 2008 tax returns, your most recent pay stubs and your investment account statements. Make a copy of your last Form 1040 and pencil in estimates of your 2009 income, estimated itemized deductions, withholding, credits and final tax due or overpayment. Are there ways to legitimately increase your deductions or defer income into next year and ultimately reduce you taxes for 2009?
Estate planning
Review your life, disability, health, long term care, and property and casualty coverage with your insurance agent. Additionally, every adult should have a basic estate plan that begins with a will, durable power of attorney and a health care directive. Also, make sure that the named beneficiaries on your pension plan, insurance policies, IRA’s and similar contracts are current.
The broader economy will affect all of us, however you have to make sure that you and your family are doing all that you can to make sure that 2009 is a positive step in your journey toward pursuing your financial goals. Take the time now, during July, to make your mid-year financial corrections.
Michael G. Shinn, CFP, Registered Representative of and securities and investment services offered through Financial Network Investment Corporation, member SIPC. Visit www.shinnfinancial.com for more information or to send your comments or questions to shinnm@financialnetwork.com. © Michael G. Shinn 2009. Neither Michael Shinn nor Financial Network provides tax advice. Please consult a tax professional before implementing any strategy.
