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Money & Policy

Experts’ Tips for a Midyear Money Checkup

The 'Friends Talk Money' podcast on making smart financial moves in a weird year


This is the time of year when personal finance writers like to tell readers to give themselves a midyear money checkup. That’s a good idea for 2020 and my co-hosts on the Friends Talk Money podcast and I have a few suggestions in our latest episode. But frankly, it seems like this year has already been five years long.

Friends Talk Money podcast logoThe coronavirus, of course. Millions of job losses and furloughs, leading to economic collapse and uncertainty. The vital discussions and protests concerning racial justice. Multiple stimulus programs from Washington, D.C. Plus, for investors, the double-digit stock market plunge in the first months of 2020, followed by a rebound.

But the roughly 3% year-to-date drop in the broad stock market index — the S&P 500 — masks how wild stocks have really been. While shares of tech stocks are up about 14%, overall, index funds comprised of international stocks are down 9% or so. And markets in certain countries have cratered; the FTSE 100 index of large British stocks, for instance, has sunk by 18%.

Midyear 2020: A Time to ‘Stop and Pause’

“This is a time to stop and pause,” said my Friends Talk Money podcast co-host Pam Krueger, co-host of public television’s MoneyTrack and founder of Wealthramp.com, in our midyear episode. (You can listen to it at the end of this article or on any streaming service where you get your podcasts.)

“I’m not so concerned about the return on my money as the return of my money.”

And, added co-host Terry Savage, a nationally syndicated personal finance columnist and author of The Savage Truth on Money: “There’s still so much uncertainty about the future course of the pandemic, about the reopening and about the recovery. You have to take that into account. Plus, it’s an election year — you can expect both parties of Congress will do everything they can to try to buy your vote.”

So, deep breath, what to do during your midyear money checkup?

Krueger recommended focusing on how much you now have in cash, for emergencies, and how much you should have.

“Given the work situation and job security, I would say you should have at least one year’s worth of living expenses in checking or savings or a very short-term account,” said Krueger.

Advice About ‘Chicken Money’

Savage calls this “chicken money.” Remember the mantra of chicken money, she advised on the podcast: “I’m not so concerned about the return on my money as the return of my money.”

Krueger’s second midyear tip: “If you’re worried or upset about seeing the markets up and downs and bouncing around, don’t let your emotions dictate” financial moves that could affect the rest of your life.

Specifically, Krueger said, if you’re around 62 and now wish you had extra income to compensate for 2020’s investment losses, don’t be rash and start claiming Social Security. “You won’t get as much [in monthly benefits] as you would by waiting until later, when you may really need the money more,” she noted.

For every year between your Full Retirement Age (66 to 67, depending on when you were born) and 70 that you delay claiming Social Security, your benefits increase by 8%.

An Alternative to Claiming Social Security Early

Rather than claiming Social Security early, penalizing you for years to come, Krueger and Savage recommended spending time now looking for ways to earn gig-job income, even if it’s your only employment earnings. The website Sidehusl.com, I noted, is a good place to size up possibilities.

“If you can work part-time, please keep working,” said Savage. “All the money you bring in has a chance to grow for your future.” The day you quit work altogether, she added, “is like a light switch” going off. “It changes your whole life experience,” said Savage.

I thought Savage had another smart midyear-money suggestion: Get, and fill out, the free personal financial organizer on her site, Terrysavage.com. Then, tell a loved one or trusted friend where they can find your completed version in case, one day, they need to manage your finances because you can’t.

As for the stock market, don’t waste time trying to gauge whether this is the right time to get in or get out or which particular stocks to own.

Once you have enough cash squirreled away in emergency savings, you should then keep some money in a diversified group of stocks, such as an S&P 500 index fund. And round that out with a safe short-term or intermediate-term bond mutual fund.

Rebalancing Your Investments Is Wise

Midyear is a great time to consider rebalancing your investments. That means checking to see that the percentage you want to hold in stocks and in bonds is still where you want it to be after the market’s moves in 2020. And if it’s way off, adjust accordingly by increasing or decreasing the percentages to where they should be.

Savage urges caution about bonds, though, because interest rates are so low. When rates go up, bond prices go down. Currently, Savage said, “there’s a risk of rising rates, which could devastate the value of your bonds,” she said.

Don’t bother trying to chase whichever type of stocks have been hot lately, said Savage. “By the time you get there, something else is coming along,” she noted. “I’m all for diversification. I’m not a stock picker in my own life.”

If you feel you missed out on the tech stock runup of 2020, you may be mistaken. When you own an S&P 500 index fund, which holds shares of the 500 biggest U.S. companies, “tech is included in your portfolio by definition,” Savage said.

Finally, Krueger offered a financial planning reminder specifically for 2020. On June 30, the Securities and Exchange Commission began enforcing a new rule for brokers and their clients known as Regulation Best Interest, or BI.

Now, brokers are required to put their clients’ best interests ahead of their own. Previously, brokers only needed to adhere to a “suitability standard,” meaning they believed an investment they recommended was suitable for a client. The Best Interest rule “is a step in the right direction,” Krueger said.

 

RIchard Eisenberg, editor at Next Avenue wearing a suit jacket in front of a teal background.
By Richard Eisenberg
Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Follow him on Twitter.

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