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A midyear financial review is often a good idea. This year, it’s almost essential.
With people going back to offices, travel resuming and Congress making significant changes to various laws affecting your finances, consider taking some time to check in on your money. You might be able to make some smart moves to reflect the new realities.
See where your money is going now. Using a budget- ing app or taking a close look at recent bank and credit card statements can help. Then think about expenses you may face in the near future.
If you’re using your car more, for example, you might already be paying more for gas and insurance, but you also could face higher costs for maintenance or repairs. If you have kids, you might plan for back-to-school costs, sports equipment and activity fees. Vacations, travel, weddings and other celebrations may need to be budgeted for, as well. It can make sense to trim some costs so you can afford these resurgent expenses.
One possibility: Rotate your streaming services and other subscriptions. These may have sustained you during lockdowns, but you could put some on pause now to save money while you continue to enjoy others.
Perhaps you have more income: You’re back to work after being unemployed, or you’re a parent about to get the first of six monthly child tax credit checks from the IRS. (These payments will be up to $300 per eligible child starting July 15). Making a plan for this income can ensure it goes where you want, rather than dribbling away in unplanned purchases.
Forbearance on federal student loans is scheduled to end this fall, with monthly payments resuming in October. If those payments would be a hardship, contact your lenders to see if income-driven repayment plans or other measures would help.
If you requested forbearance on your mortgage pay- ment or other debt, that has an expiration date, as well. Debt that’s in forbearance isn’t forgiven, so you’ll typi- cally need to plan to make up the payments you missed. Check with your lender about your options.
FLEXIBLE SAVINGS ACCOUNTS
Congress more than doubled how much employees can contribute to flexible spending accounts for child care in 2021. Workers can put in a maxi- mum of $10,500, up from $5,000 in 2020. The limit for health care FSAs remains $2,750.
This year, you’re also allowed to make midyear changes to your contribu- tions to either account, something that normally requires a change in life cir- cumstances such as mar- riage or having a child.
Your employer must opt in to these changes, but if it has and you can increase your contributions, you could save significantly on taxes.
FREQUENT TRAVELER PROGRAMS
Last year airline, hotel and rental car companies softened the rules for their loyalty programs to reflect pandemic travel restrictions. Many extended the expira- tion deadlines for points, miles and free hotel night certificates. But the pause on expirations won’t last for- ever. Check your rewards programs and make plans
to use your rewards before they disappear.
Similarly, you may have credits from canceled travel that also will expire if you don’t use them. If you can’t use those in time, request an extension.
If you buy your own insurance, you may get a better deal on the Affordable Care Act exchanges now that Congress has expanded the subsidies, reducing costs for most people. If you don’t already have ACA cov- erage, there’s currently a special enrollment period that ends Aug. 15. If you get unemployment benefits at any point during 2021, you can qualify for a zero-premium comprehensive policy. COBRA coverage to extend an employer health insurance plan is also free from April to September.
Companies with 401(k)s are now required to let part- time workers contribute if they have worked more than 1,000 hours in one year or 500 hours over three con- secutive years. Contact your employer for details.
Congress eliminated the age limit for making contri- butions to IRAs, so you can contribute past age 70 ? as long as you have earned income such as wages, salary, commissions or self- employment income. Also, the age that typically trig- gers required minimum dis- tributions from retirement accounts has been moved from 70 ? to 72 for people born after June 30, 1949.
If you’re feeling generous, though, the age at which you can start making quali- fied charitable distributions from an IRA remains 70 ?. These withdrawals won’t be added to your income if the distribution is made directly to a qualified charity.