Stay The Course Or Pivot? A Mid-Year Financial Check-In For Older Adults

By Lazetta Rainey Braxton, Next Avenue

With the first half of the year behind us, now is a good time for a quick, mid-year financial check-in. Knowing that you have places to be and people to see this summer, let’s get right to assessing if you’re on course to realize your financial goals or need to pivot in order to do so.

With the Fed’s recent hike in short-term interest rates of 0.75% (the biggest jump since 1994), are you “crying uncle” — declaring enough with rising rates on credit cards, personal loans, auto loans, and new mortgages? Rising interest rates signal rising household debt payments; rising debt payments squeeze cash flow and alter your lifestyle plan.

To add salt to the financial wound, the interest rate jump left little time to adjust to rapid inflation that pummeled our wallets with exorbitant grocery bills, gas prices, and everything else you can imagine. Instead of panicking or ignoring reality, let’s assess your approach to modifying your lifestyle plan as a hedge against inflation and rising rates.

• Have you determined which expenses will be reduced to make room for the higher-priced essentials (e.g., service memberships, travel, takeout)?
• Have you put a halt on “lifestyle creep” — the tendency to buy more expensive purchases over time?
• What are the interest rates on your debt and can you pay off the balances sooner or consolidate them at a lower interest rate?
• Will the timing and amount of your next pay increase, promotion, bonus, vesting date for restricted stock units (RSUs) or other bump in income be sufficient to cover your rising expenses and leave room for saving?
• Is it time to pursue new income streams to cover higher expenses by getting a side gig?
• Have you made your final decision to continue renting instead of buying a home due to rising mortgage rates?

Understanding the ripple effect of higher interest rates and inflation on investments warrants close examination as well. Our investments in the stock and bond markets typically comprise of publicly-traded companies that produce the goods and services we consume. These companies also feel the pinch, with inflation dampening demand from consumers and higher costs of capital suffocating business growth and profits.

What does this mean for our investments? Let’s take inventory.

• Are you in the right mix of stocks, bonds, and cash (asset allocation) in your taxable and tax-advantaged accounts considering when you plan to take withdrawals?
• If you’ve been partnering with a financial planner, often there are minimal to no tweaks to your asset allocation unless your financial situation has changed drastically. Your investment plan was designed with your goals, sensitivity to risk, and anticipated market drops in mind. If this question caught you off-guard, now is the time to consult the online retirement tools and the plan representative from your employer’s retirement plan as a starting point.
• Have you been sitting on a lot of cash over the years due to fear of financial markets or because you were stuck on what to do with it?
• If yes, this could be an ideal time to enact the “buy low/sell high” mantra by investing some cash in diversified stock investments such as mutual funds and ETFs with an online brokerage. If your appetite for risk remains low, consider investing in interest-yielding fixed income vehicles such as money market accounts, individual holdings such as CDs, iBonds, U.S. Treasuries, as well as diversified bond mutual funds and ETFs.

Before we close out this quick, mid-year financial state of the union, let’s turn to reviewing key financial documents and making changes if necessary.

• Have you reviewed your insurance policies to ensure sufficient coverage in case of property loss, disability, and death?
• Do you know why your income tax refund or tax due was more than $1,000 and have you made adjustments to avoid paying too much or too little to the government?
• Are your beneficiary designations on your life insurance policies and financial accounts (e.g., checking, savings, taxable, and retirement accounts) up-to-date?
• Are your estate planning documents drafted and current?

If this mid-year financial check-in didn’t feel so quick, you have some great questions to ponder during your summer excursions and time to pivot over the upcoming months.