Performing a mid-year financial checkup


Why is performing a mid-year financial check-up important? Performing a mid-year financial check-up is akin to visiting a doctor for an annual physical or visiting an auto mechanic for a periodic tune-up. The purpose is two-fold; the first is preventative that is, identifying and addressing potential issues before they become significant problems. The second purpose is diagnostic, that is, identifying and addressing any problems that may already have materialized.

April or May are good times of year to perform such a check-up, particularly if you have already filed your tax returns. There is a treasure trove of information on your tax return that can assist you in reviewing your financial situation. Listed below are several areas in which your tax return can help you update your financial health:

Updating your budget. Your tax return is the perfect tool to help you update your budget, as it contains all your sources of income, and may contain some information on your expenses as well. Periodically reviewing your budget is crucial to ensuring that you live within your means and stay on target to meeting your financial goals, objectives, and dreams.

Portfolio review. Analyzing your tax return for items such as investment income and capital gains can lead to a broader review of your portfolio and your overall goals and objectives. For example, are there any investments that are tax inefficient and which could be upgraded within your portfolio?

Withholding. If you received a larger than expected refund, it may be advisable to adjust your withholding to create additional disposable income or investable income over the course of the year. If you owed more in taxes at the end of the year than you expected, it may be advisable to adjust your withholding to avoid potential interest for underpayment of taxes.

There are several other important areas of focus that should be addressed in a mid-year financial check-up, including:

1) Review your investments quarterly to be sure that your portfolio is aligned with your risk profile. Quarterly portfolio re-balancing forces investors to buy low and sell high and also prevents investors from straying too far in either direction from their goals and objectives. The market has recently doubled from the lows set in March 2009, presenting a great opportunity for investors to re-balance their portfolios if necessary.

2) Review your progress toward your financial goals, such as saving for a house, tuition or retirement. Are you on target to meet your goals? What obstacles are preventing you from succeeding? What might need to change in order for you to be successful?

3) Review important financial documents, such as wills or life insurance policies, annually. Significant life events, such as marriage or the birth of a child, may necessitate a change to your financial plan.

4) Review your credit history for incidences of fraud and for ways to improve your credit score. Free annual credit reports are available at

Schedule your mid-year financial check-up on your calendar just as you would any other important meeting, such as your annual physical.

Joseph Jennings, CFA, Investment Director, PNC Wealth Management has 14 years of wealth management experience and received his MBA in Finance from Loyola University. He is a Chartered Financial Analyst (CFA) charterholder and member of both the CFA Institute and the Baltimore CFA Society. He can be reached at