It's been a rocky few months and an unquestionably difficult year for most of us thus far, but that doesn't change the fact that we're midway through 2020 and it's time to give your finances a closer look. Here are a few moves to make so you can see where you stand regarding money and how you can take steps for improvement well before the end of the year.
1. Assess your investment portfolio
It's always a good idea to have a well-diversified portfolio -- especially now that we're in a recession. But current economic conditions aside, your portfolio should contain a mix of stocks and bonds (ideally, much heavier on the former if you're fairly young), and within the stock category, an array of companies from different industries. That way, if, say, auto stocks tank at one point this year but only comprise 8% of your portfolio, you won't get burned too badly.
See what your holdings look like, and if you're not happy with your investment mix, shift some assets around. (Right now's a good time to do that since the stock market has largely recouped its value from its lows back in March.) Another way to instantly diversify is to load up on index funds, which track existing market indexes in an effort to match their performance. Buying an S&P 500 index fund, for example, effectively lets you invest in 500 different stocks at once.
2. Check up on your retirement plan contributions
In 2020, you can contribute up to $6,000 to an IRA if you're under 50 or up to $19,500 to a 401(k). If you're 50 or older, these limits increase to $7,000 and $26,000, respectively.
Many people have lost income this year due to the COVID-19 crisis, and if that's your situation, you may be behind on retirement plan contributions -- and understandably so. But if your income has held steady or you were out of work but you've since gotten a job again, it pays to take the opportunity to put money in your IRA or 401(k).
You may not have the ability to hit the aforementioned limits, and that's fine. But what you should aim to do is sock away 15% or more of your earnings for the year if your finances allow for it. And if you have a 401(k) through work, you should at least contribute enough money to snag your employer match in full.
3. Do some tax planning
At this point of the year, you may have already submitted your 2019 tax return (it's due on July 15), and if not, you're probably gearing up to do so. While you're taking that step, you should also take the opportunity to do some smart tax planning.
Take a look at how your 2019 taxes have panned out. Are you due a large refund? If so, you may want to adjust your withholding to have less tax taken out of your paychecks for the rest of the year (assuming your income is comparable to what it was last year). Or you may need to do the opposite -- if you owe the IRS a lot of money for 2019, you may need to have more tax withheld from this year's earnings to avoid a large underpayment.
Right now, a lot of people are focused on simply making it through 2020 physically and emotionally unscathed, so financial planning may be the last thing on your mind. But if you make the above moves, you'll be setting yourself up to end the year on a financially healthy note, and that's reason enough to make the effort.