Give Yourself a Midyear Financial Checkup

US News

Consumers often aim high when setting financial New Year's resolutions. Some resolve to pay off six figures' worth of student loan debt, while others hope to sock away 10 percent of their net income into an individual retirement account. Impulsive investors may vow to ignore the stock market's day-to-day changes and focus on the long term.

But even those with realistic goals often don't make it far. Of the 45 percent of Americans who make New Year's resolutions, only 8 percent achieve them, according to recent data by online investment company Betterment.com. In fact, 25 percent of people give up before the first week is over.

Fortunately, those who have veered off-course can still achieve their monetary resolutions by December 31. The half-year mark is a great time to examine these financial behaviors and adjust your spending, saving and investing strategies.

Paying down credit card debt. Step one to gauging where your finances stand is assembling an inventory of how much you owe and to whom. The average credit card debt per borrower in the United States is currently around $4,900, according to a May report by TransUnion. Users who can't make their minimum monthly payments will see their credit score plummet quickly. Even those who make the minimum payments risk lowering their score if they maintain a high credit utilization ratio, or the ratio of the credit-card balance to the credit limit, which experts say should be kept under 15 percent. Consumers with poor credit have trouble qualifying for low interest rates on credit cards. In addition, mortgage and auto loan lenders pull an applicant's credit report before deciding whether to offer a loan.

[Read: What It's Really Like to Live on a Shoestring Budget.]

John Ulzheimer, president of consumer education at SmartCredit.com, says one strategy for paying off credit card debt is to start paying off debt on the card with the highest interest rate, as money owed on that account grows faster each month. Ulzheimer says other consumers prefer to pay off the card with the lowest amount of debt first because they feel receiving one less bill each month will motivate them to continue paying off their credit card debt.

Executing either approach will nurse a credit score back to health, but it will take time, as history on an account remains on one's credit report for seven to 10 years.

Even if you never carry a balance, it's important to check your credit report for errors. Consumers are legally entitled to one free credit report every 12 months at AnnualCreditReport.com. While the report doesn't include your credit score, free services such as those offered at CreditSesame.com and CreditKarma.com can provide an estimate of your score.

Earning credit card rewards. Responsible credit card users should look into getting a rewards card that best matches their spending habits. While many issuers are offering competitive rates, there are some standouts. Odysseas Papadimitriou, chief executive officer of the credit card comparison website CardHub.com, likes the Chase Sapphire Preferred card, which offers $500 in travel rewards or a $400 statement credit for spending at least $3,000 during the first three months. He also likes the Blue Cash Preferred card from American Express, which gives 6 percent cash back at supermarkets up to a $6,000 annual spending limit in that category, 3 percent at gas stations and department stores and 1 percent on everything else.

Planning for retirement. If you aren't taking advantage of an employer-sponsored retirement account, reconsider. Money contributed to a 401(k) is tax-deferred, and around a third of employers match up to 3 percent of employee salaries, according to a 2011 survey by trade publication PlanSponsor.com. As such, maxing out your 401(k) is one of the best ways to build your nest egg, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial.

[See: Why Gen X Lost Big in the Great Recession.]

Modifying your investing strategies. Now may be a good time to rebalance your portfolio - a practice in which investors periodically adjust their mix of investments to keep them in line with their target asset allocation. "As the market rises, we get complacent and just leave our money where it is, and we don't think about whether there are better places to invest that money," says Philip Hogg, a certified financial planner in Chicago.

Other consumers make the mistake of reacting to the market's daily shifts, says Adam Sherman, chief executive officer at Firstrust Financial Resources in Philadelphia. "Even if you're tracking your account [activity] live on your BlackBerry, I wouldn't get caught up in the day-to-day noise," Sherman says. If you have a tendency to make impulse trades, consider conducting in-depth studies of your investment portfolio in June and December, and commit to making stock trades only after those analyses.

Sticking to a budget. If you haven't already, create a budget using an online tool like Mint.com to track your monthly expenditures. From there, develop a plan to cut costs on discretionary living expenses that are straining your wallet. (Many consumers spend excessively on dining out and weekend entertainment.) Joe Heider, a certified financial planner at Rehmann Financial in Cleveland, Ohio, says consumers should ideally save 10 percent of their net income each month, but even saving 2 percent would be a significant improvement for many Americans.

Building a rainy-day fund into your budget provides financial protection from unanticipated events, like a major car repair. As such, financial planners say it's crucial to put a portion of your savings into an emergency fund you can easily access that would cover three to six months' worth of living expenses if you were to lose your job.

[See: 50 Smart Money Moves.]

Shopping smarter with coupons. Coupon expert and syndicated columnist Jill Cataldo says spending just 30 minutes a week compiling coupons can help stretch your budget. Consumers can find coupons easily on websites such as RetailMeNot.com and Coupons.com, on mobile apps like Grocery iQ and in newspaper inserts. Cataldo recommends consumers hone their coupon shopping skills at the store they frequent the most, rather than try to find coupons for every retailer they visit. "You don't have to save $60 or $70 the first week out," she says. "Just saving $10 to $20 a week adds up [to] between $40 and $80 in savings each month."

Scoring a salary hike. Everyone would welcome a raise, and you can increase your chances of landing one by displaying what you've done to deserve it. With midyear reviews coming up, now is a good time to broach the subject, says Margaret McLean Walsh, a career coach in New York City. Talk with your boss to get a clear picture of what success looks like. "Be specific, so you get feedback you can work with," Walsh says. Exceeding those expectations and continuing to show your worth to the company will help you gain your boss's favor and position you for success come December, which is when most companies plan for 2014 salaries.



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