Time for that mid-year financial checkup

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 likely just as bad. Unemployment was 9.7 percent in May and will probably 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 late this year or in early 2010. President Obama and Federal Reserve Chairman Ben Bernanke have professed to see "glimmers of light" in the economy and are optimistic about the future. Closer to home and most importantly, how is the economy affecting your family and your financial plan?

What has changed in your family's life? Have any marriages, divorces, births, health changes, layoffs, retirements or graduations taken place? How have family changes affected your financial plan? 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. Are their ways that you can take advantage of today's relatively low interest rates by possibly refinancing your mortgage or switching to a lower rate credit card?

Have you maximized your income potential? Is overtime or a second job available for a few months to allow you to remove the albatross of bad debt from your life? Consider alternative ways to reduce expenses like buying clothes during seasonal sale periods, cooking meals at home, or using public transportation.

If you have not set up 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.

Do your current investments fit your long-term investment objectives and time horizons? Review your most recent 401k, IRA and investment account statements. What has been their performance over the last twelve 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?

Insurance and Estate Planning

Review your life, disability, health, long term care, and property and casualty coverage with your insurance agent. Is your coverage adequate and cost effective? Additionally, every adult should have a basic estate plan that begins with a will, durable power of attorney and a health care directive.

Are these documents current and stored in a secure place? 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, is a registered representative of the Financial Network Investment Corporation, member SIPC. Visit www.shinnfinancial.com or send your comments or questions to shinnm@financialnetwork.com.