Mid-year financial review: how are your investments? – by SoFi | Zoom Fintech
In the northern hemisphere, the summer solstice occurs when the Earth’s north pole is at its maximum tilt toward the Sun. On this magical day of the year, Earth receives the longest expanse of daylight.
In many cultures, the solstice is an important time of the year and celebrated with festivals, ceremonies and traditions. For some, the summer solstice is a time of reflection on renewal and rebirth.
Whether or not you’re celebrating the summer solstice, the day’s proximity to the middle of the year makes it a great time to reflect on your own progress. It is a wonderful time to look both forward and back.
The middle of the year is also a good time to take stock of your life and your goals. If you plan to take a personal inventory, don’t forget to make a financial statement part of your thinking time.
While many people take stock of their finances early in the year, it may not be enough. A healthy financial life isn’t one where you set it up once, never to worry about it again. Just like going to a doctor once does not make you physically healthy. Routine financial statements are an essential part of overall financial health.
Have you checked your savings plan? What about your investments? With the spirit of the summer solstice as your guide, here are some ideas on how to take a financial balance in the middle of the year.
Use the summer solstice as a motivation to check your savings goals. Here are some questions to consider:
1. Am I on track to meet my savings goals?
If you set yourself a savings goal early in the year, now is a good time to determine if you are on the right track. For example, if your goal was to save $ 5,000 in a emergency fund, you’ll want at least half of that amount saved halfway through the year. If you’re behind on your goals, strategize to get back on track.
For some, it may mean considering spending for the first half of the year, looking for ways to cut back. Others may want to consider ways to increase their income. Either way, this is the season to refresh your savings plan.
2. Is my savings automated?
To step up your savings game, you can consider automating contributions to savings accounts. You may already have 401 (k) or other pension contributions that have already been deducted from your paycheck, but what about automatic withdrawals to fund other savings goals, like a emergency fund, or saving for a car or a trip?
And if you don’t have retirement account set up with an automatic deduction, consider doing that too! Saving is easier when it requires as little brain power as possible on our part.
You may even consider opening savings accounts separate from your checking account. There aren’t just accounts like SoFi Money where you can earn interest on your money, but keeping the money separate keeps you from spending it, and can be inspiring as you watch the account grow.
Here are some questions to ask yourself when studying your investments.
1. How are my accounts assigned?
Asset allocation refers to the combination of cash, stocks, bonds and other asset classes in your investment portfolio. Generally speaking, it is best if this combination represents your goals and risk tolerance for that particular money pool.
For example, you may feel comfortable taking more risk and aiming for growth with the retirement money because you won’t need this money for a long time and therefore will keep a higher percentage in stocks. .
Reassess your goals, risk tolerance, and the schedule for each money pool. Is your current asset allocation appropriate, or is there a mix of investment types that would work best for you? For example, if you are nearing retirement, you might want to adopt a more conservative allocation.
If the idea of determining your own asset allocation is beyond you, you may want to consider getting help. Automated investment departments determine the appropriate mix of investments for an investor given their goals and invest accordingly. It’s great for those who want a hands-off approach.
2. What fees do I have to pay?
Investing can be a great way to build wealth over time, but what many investors may not realize is how erosive the costs of investing can be on their overall returns. In your investment accounts, you might pay account maintenance fees, advisory fees, and trading commissions, to name a few. Do you know what fees you are paying?
While you can’t control what the market will do, you can limit the amount you pay in fees. And currently, it is possible to find banks and financial services companies that charge little or no fees for investing. The two SoFi Active investment and SoFi Auto Investing offer the possibility of investing without additional SoFi fees.
3. Who are the beneficiaries on your accounts?
Many investment accounts, such as retirement accounts, allow you to designate a beneficiary or beneficiaries for this money. A payee is a person to whom money is passed on in case something happens to you.
If you have not yet put beneficiaries on your account, it may be wise to set up one (or more). If you already have beneficiaries, do they need to be updated? Also consider adding a contingent beneficiary, which is the person who will receive the money if the primary beneficiary dies before you do.
4. Are your investments diversified?
“Don’t put all your eggs in one basket” is the idea behind the investment diversification. Diversification can help mitigate some risks in your portfolio, although it will never eliminate them completely.
Diversification applies to all levels of investment, starting with the overall decision to choose which asset classes to invest in, through to smaller decisions, such as which shares of the company to hold. Likewise, you might want to consider whether your investment portfolio is too concentrated in a country, industry, or stock.
5. What is the tax status of your investment account (s)?
When it comes to investing money, there are three types of accounts that you can use from a tax perspective. The first is tax-deferred, which means you don’t pay taxes on the money you save now, but pay them later when you withdraw the money in retirement. 401 (k) accounts and Traditional ARIs could benefit from a tax deferral.
The second is a Roth IRA or Roth 401 (k), where you pay income taxes now but don’t pay income taxes later. In both types of tax-deferred and Roth retirement accounts, you pay no capital gains tax.
Finally, taxable accounts, which do not benefit from any special tax treatment, are sometimes used to buy and sell investments for purposes shorter than retirement. In addition, some people use taxable accounts to invest once they have “the maximum” amount of money they can contribute to a retirement account.
Everyone’s tax situation is going to be different, so check with a licensed tax professional to make sure you’re investing in the account that’s right for you. That said, some people may want to diversify their tax strategy in addition to their investments, by investing money in a combination of account types.
If all of this leaves you with more questions than answers, maybe it’s time to talk to a financial planner. Not only can SoFi financial planners answer your questions about money, but they can perform holistic financial reviews that touch on many aspects of your finances. This could be the perfect addition to your summer solstice exam.