What a Mid-Year Financial Review Should Look Like with Joe Neff

A mid-year financial review can reveal whether your goals, spending, taxes, and priorities are still on track—or whether it is time to make an adjustment. George is joined by Measured Wealth advisor and CFP® Joe Neff to explain why these conversations should go far beyond investment performance. They discuss how life changes, tax planning, cash flow, and overlooked financial habits can shape the second half of the year.

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Transcript

SPEAKER_03 0:01

We're already halfway through the year. January is when everyone sets financial goals, but by July, many people haven't looked at them once. Life happens, plans change. That's why now is a great time to talk about what a mid-year review should actually include. So stay with us.

SPEAKER_00 0:18

The information and opinions presented in this podcast, including the views of guests not affiliated with measured wealth, is for general informational and educational purposes only and should not be considered investment, tax, or legal advice. Any references to specific securities, products, or services do not constitute a recommendation or endorsement. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. Listeners should consult their own financial professionals before making any financial decisions. Measured Wealth Private Client Group is registered with the Securities and Exchange Commission. This registration does not imply a certain level of skill or training.

SPEAKER_01 0:59

Welcome to Financial Futures, a Measured Wealth podcast powered by the team at Measured Wealth in beautiful Portsmouth, New Hampshire. Each episode, we're bringing you fresh insights on retirement, investing, and everything you need to take control of your financial future. Whether you're preparing for retirement or already living it, we're here to help you make informed choices with confidence. To kick off today's conversation, here's your host, certified financial planner and chartered financial analyst, George Zaharopoulos.

SPEAKER_03 1:37

Joe is a certified financial planner, and he's a wealth advisor at Measured Wealth. And today we're talking about the mid-year review. Joe, great to have you back. How are you? I'm doing okay. How are you? Doing great, thanks. Got an exciting conversation today, mid-year review. Not a lot of people are thinking about it, but it's definitely right up there with importance. So I want to start it off with kind of what's critical. Like what's the biggest takeaway after someone listens to this podcast? What do you want them to know? Um you know, what do you think that big takeaway is?

SPEAKER_02 2:10

I think the big takeaway is that mid-year reviews are not a waste of time. There should be some depth there in one of these meetings.

SPEAKER_03 2:16

Absolutely. Okay, great. Um, so and sometimes don't even just meet with your advisor once, meet multiple times throughout the year because you know, a lot, a lot of things change. And and that gets us into, you know, when you think about a mid-year review, what are the three most important conversations every client should be having right now?

SPEAKER_02 2:36

I think the the three most important topics that you should be looking at are taxes, progress, and changes.

SPEAKER_03 2:44

All right. Awesome. That's a lot. So let's go deeper. Expand on those. You know, why these conversations, why mid year? Well, where do you want to start? Uh let's start with progress.

SPEAKER_02 2:56

Progress. Well, I mean, that that is exactly what it sounds like. So you mentioned that people set all kinds of goals in January. The thing that I think most people ignore is the fact that I think it's January 17th, right? It's Quitter's Day. It's when the majority the majority of people have given up on those New Year's resolutions or those annual goals. And, you know, having having somebody to keep you accountable and figure out where you're at with those is, I think, a super important thing.

SPEAKER_03 3:25

Okay. What kind of progress, you know, when it comes to financial planning matters, should people be, you know, keeping an eye on?

SPEAKER_02 3:34

Yeah, I think it depends really on the famous financial advisor answer, right? It depends. I I think in terms of progress, you take the goals that you set for yourself at the beginning of the year, whether it's make hitting certain milestones, right, paying down this debt, saving this much into an investment account, meeting monthly contributions, spending less. It's really individualized.

SPEAKER_03 3:59

Okay. Um, number two, I think you mentioned were l uh changes. What kind of changes have happened? Or yeah.

SPEAKER_02 4:07

Yeah. I mean, changes happen all the time, right? And if you're having a mid-year review and it just so happens to fall perfectly in the calendar year, you're looking in June, July, right? Though that mid-year time frame, I did was doing a little digging earlier just in preparation for the podcast. And um, May, June, and July are the most popular months for buying a house. So that means maybe a new mortgage, new property taxes, new homeowners insurance policy, what's best for each of those, right? Or it's a renewal period. Every year your homeowner's insurance renews, and maybe the value on your house has gone up, you need more coverage. Maybe the premiums are getting out of control and you need to shop it around. But unless you're unless you're actively paying attention to that, or you're working with somebody who does, you're probably just gonna accept the fact that the premium has gone up.

SPEAKER_03 5:00

Mm-hmm. Yeah, this is a good time to reassess uh any any major expenses that might occur during the year. Maybe there's an addition to the family uh where you know things need to be revisited, and or maybe you just want to expedite your retirement date, like most of us. But you know, so those are all big changes that can affect the financial plan, and uh that's where you can address, you know, what do we need to do about this?

SPEAKER_02 5:27

Yeah, and maybe it's changes that haven't happened yet. Right? So we talked about progress, and um, maybe one of your goals for the year was to pay your credit card off on a monthly basis instead of letting it accrue and charge you what's it at now, like 20 to 30 percent interest. So maybe you haven't made the progress on that goal and you need to make that change, right? Maybe you need to structure things a little differently so you can make that change. Middle review is a good time to do that.

SPEAKER_03 5:53

Yeah. All sorts of things to look at in terms of cash flow. Another big item, or number three on that list, I think what I heard you say was taxes. There's a lot to unpack there, but um, what do you think people should be thinking about when it comes to taxes?

SPEAKER_02 6:09

I think the the closer you can get to not having a tax to having a tax bill not be a surprise, the better. And I think at the mid-year mark, we have a pretty good idea of where income's gonna be at for the year. Right? There there's some, I mean, seasonal businesses are seasonal businesses. But if you're making a regular paycheck, you have regular expenses, usually by now you have your trips planned out. It's a great time to know like how much money will I need, and then how much will my monthly income be, so that at the end of the year we can be ahead of things like the capital gains in your accounts. We can be ahead of things like maybe your W-2 withholdings are not enough. And uh as advisors, we work together with CPAs to help coordinate these things. And I I don't want to be mean, but sometimes CPAs are act more as historians than I get I think most people need. Right. There are some great CPAs out there who help you do tax planning, but when you're doing tax preparation, your job is looking backwards, not forwards. When you're working with an advisor, our job is only looking forward.

SPEAKER_03 7:17

Yeah. Uh one of the things that I actually enjoy about the financial planning process is the tax planning piece. So this kind of hits home a bit. Um, and not that I'm a CPA and I don't hold myself out as a tax advisor, but we we do get into the tax planning aspect. And it's it's comforting to know that that is a is a big factor because you know, for some people out there, you know, they have to keep aware of some Medicare brackets. They have to keep aware of, you know, uh what kind of gains they're taking in in some of their accounts, what what taxable income they're coming from with uh retirement withdrawals. So I I think uh a lot plays into that. And I think you know, there's strategies. Uh, I know in prior podcasts we've talked about Roth conversions and things like that. So that that all comes into you know, forecasting what can potentially take place before the end of the year. Uh but then there's also for those people who are still working, they're contributing to their 401k, you know, it's a good time um to bring up what percent they're contributing to the plan and you know, are they maximizing the match that they're getting from their employer?

SPEAKER_02 8:24

I I think if I'm gonna interrupt you because I think we can pause there and talk about that. Because one thing in working with a lot of high-income individuals that I've I've seen is certain 401k or 403B plans are written in a way that if you front load, say, your 401k contributions, if you max it out early in the year, your match is not going you're not going to get the full match because your salary isn't high enough yet, versus spreading it out through the whole year, right? So it having that mid-year review or I mean having that on the scope in general of what's going on, right? Getting your advisor the summary plan description um that should be given to you once a year is that's huge, right? Because the that match is part of your compensation package. And if you're not getting the full match, you're you could be leaving a paycheck on the table.

SPEAKER_03 9:14

Yeah, and think about it from a business owner's perspective, too, on you know, maybe accelerating deductions or accelerating some funding into uh the 401k plan from the employer side. So a lot to take into consideration if you're a business owner as well, right? Yeah, we can get really nerdy with this one.

SPEAKER_02 9:36

Um Yeah, so one of the things with if you're looking at if you're a business owner looking at your finances mid-year, a lot of business owners go on extension. So they're not fully filing their taxes until October. We're getting to the end of when you can apply, or as far as I know, we're um we're getting to the end of the time period where you can open a 401k for the prior year and make a profit sharing contribution, which if you're sitting on a huge taxable earning, that could be a big that could be a big big break for you while keeping your money invested, right? You so you put in that pre-tax contribution, you keep the money invested, you get a break on taxes, and your employees get a new benefit. Right. So having that in a mid-year review, making sure you're taking advantage of the retirement planning options available at the employer level, um, is a huge deal. And then I mean, these things they they move from being like the necessarily tax minimization for this year and looking forward, you you get it gets a lot more strategic. And when do you take certain types of taxes? When do you defer certain types of income? Um, what place you're in? Are you in the are you in a place where you need to be investing more into your business to help it keep growing? Or are you in a place where income is steady enough that you should be looking at diversifying a little bit and getting some retirement savings going?

SPEAKER_03 10:55

Yeah, that's a good point. I think we could do a full podcast on business owners alone. Um and one thing I wanted to actually bring back too, um, when it comes to changes in a situation, you know, that might affect beneficiaries. So all of this comes into play, you know, not only, you know, is it affecting just is i it's not only just one conversation about what has changed, but that that change may have affected now what you do for estate planning.

SPEAKER_02 11:22

Yeah. I mean, somebody one of one of your nieces and nephews could mouth off to you at the Easter dinner table and uh you might want to make some changes to to the beneficiary designations of the will.

SPEAKER_03 11:33

I mean, that sounds like it's come from personal experience. Not quite yet. Oh man. But um Joe, do you think that most people are having these conversations, you know, mid-year with their financial advisor?

SPEAKER_02 11:51

No, I I think I think most people go to their financial advisor mid-year because they're worried about how their investments are doing. So you I mean typical mid-year review, if this is not wrong, then you've got a good advisor. But um, it's usually banter about how life's going and stuff like that, and a little bit of small talk, and then hey, we're gonna review your investments, and you go through and oh, you performed this X year to date, this X since like over time, and then any questions? And um, if if I mean that's a five to ten minute meeting. Yeah, it like that's if you're squared away with your plan, you should be comfortable with how your how your funds are invested, invested. And um, if you're doing it yourself, there's a little bit more to go in there, but if you're working with somebody you trust uh to make change make changes for you as need be, right? Moving up and down with the market, yeah. The the focus should be on sure you cover investments, but you should be focusing on bigger, medier topics.

SPEAKER_03 12:54

Yeah, exactly. The investment conversation is is really a small part of that review, but um there's there's larger issues that people are dealing with that really needs to be talked through. But let me ask you this without sharing specifics, can you think of a client situation where a mid-year review uncovered something important?

SPEAKER_02 13:15

Yeah, there are have been a lot over the years where having a having a meeting in the middle of the year is important. On the business owner side, uh they're yeah, I'm trying to trying to do my best to anonymize this. Right. Um, I was working with a a business owner, multiple business locations, was looking to open up another business and was needing to figure out how to secure how to provide the liquidities to secure the loan to be able to get the funding to build the real estate for the business. And so if this had waited another three months, we would have missed the window entirely just because it ended up being this a super complex movement of money. I'm doing this to be anonymous, but we we were able to move the money around and we were able to secure the loan and then get the money back in to the specific vehicle before taxes were realized at year end, right? Because there are certain structures where you can't pull money out and then put it back in a different calendar year and have it remain have it still save the the taxability on it. Yep.

SPEAKER_03 14:21

Yeah, I mean that's uh that that's so important. You cross over to the next tax year and then you learn that something happened to the client in terms of some sort of tax uh windfall or or some sort of major capital gain took place. You almost look back and wish, oh, I really wish we got together um, you know, mid-year to really talk about that, plan for it, and figure out you know how to minimize.

SPEAKER_02 14:48

Yeah. And I I mean just to put it in something that might relate to a a few more people than complex business arrangements. Yeah, I had another client pair, they were high-income earners, and we had set up set up a plan for them and set a travel budget and set investment goals, and they came to me at the mid-year and said, Doing these investments isn't possible. We're not gonna be able to do this. And I looked at the plan, I looked at the numbers, everything checked out, and I said, What's what's going on? And they'd blown through their travel budget in the first three months of the year. They had another four trips planned, and they also had weddings to go to. Unfortunately, their friends were the kind of people to have. And I'm I guess no judgment here, but inviting people to destination weddings that cost 10 to 20 K to get to, uh, that's a little rough. Oh, right. But they had yeah, they had a a few of those weddings to go to. So we had to mid-year go into their plan, completely restructure things, figure out a way that they could still get some meaningful investment done while funding these trips, and then build out what the next year's goals were going to look like because as a result of these trips.

SPEAKER_03 15:58

So yeah. It's eye-opening. Let me ask you this. We talked about a big takeaway up front. If someone only takes one action after listening to this podcast, what would you want that to be?

SPEAKER_02 16:10

I think and it it's a I think it's a big step, but moving if you take one action. I think a mindset shift from reacting to things to being proactive. And this that's huge and overarching, right? Yes. That's a huge overarching thing. Yeah, my eyes just lit up because I think you're you're spot on. It's just yeah, being in the mindset of getting ahead of what's coming versus dealing with it when it comes. And that applies to, I mean, all the things we talked about, taxes, progress with goals, changes. And I mean, maybe it's uh maybe another aspect of your life. It could be, hey, like time to time to schedule a time with that personal trainer that I've been talking to for six months.

SPEAKER_03 16:53

Uh on that note, too, we're actually going to have a resource uh for our listeners um in the show notes. We're gonna have a link uh to a PDF of a mid-year review checklist. So for some of some of you listening today that you want to kind of organize that conversation, uh we're gonna put put that into the show notes so that you can download it, share with your advisor, and and talk through some of those conversations.

SPEAKER_02 17:20

I think that checklist will be super helpful in that I mean if you're working with somebody, if you're going to a meeting where somebody's gonna be giving you advice, you should be asking questions. Yeah. You should go go with go with things you want answers to. Go with the problems you haven't solved yet.

SPEAKER_03 17:34

Yeah, and hopefully um they're bringing up these conversations as well. But Joe, uh, got a surprise for you. Got a a rapid round of questions. Um these don't have to be one-word answers, but um are you ready for me to throw a few questions at you? Sure. Biggest planning opportunity people miss. Taxes. Okay. All right. And what do you think is the biggest tax mistake that people make? Waiting. Waiting. Okay. What's the one document everyone should review? Net worth statement.

unknown 18:10

Okay.

SPEAKER_03 18:10

All right. Um and by the way, for our listeners, there's no elaboration on these, just answers in there quickly. What's one conversation every couple should have? Budget. Oh, interesting. And what's the biggest financial habit that creates long-term success? Planning. Okay. All right. I was gonna say auto, setting up auto something. But it's all part of a plan. That's true. Um what's the biggest financial habit that quietly hurts people?

SPEAKER_02 18:41

Saying yes to everything.

SPEAKER_03 18:43

All right. Yeah, saying yes could mean you're shilling out a lot of money for things. Yeah, do we get to elaborate on it now that you're uh yeah, you want to yeah, absolutely.

SPEAKER_02 18:54

Elaborate on some of those. No, I uh I think especially for me, like when when I got out of college, when you you get the job, you start making money, you it gets way too easy to be in the habit of saying yes to everything, right? Oh, yeah, we're going on this trip. Do you want to go? Uh yeah, sure. And you know, you end up going you end up doing a lot of things you don't want to do because you feel bad saying no. But no is a complete sentence. And you know, like when it gets when you say yes to everything, it can impact you financially, it can impact your time, which I mean, let's be honest, time is the only capital you can't replenish. And then, yeah, it like you say yes to things you're not even gonna enjoy. So you're you're financially impacting yourself to go go do things that you don't want to do. It's like just because you feel like it's a it's social faux pas to say no. And then and when you do say no, you try to justify it in some way or another, saying, Oh yeah, you know, I'd love to, but I really got this. It's like, no, I'm okay. Thank you for the invite though. Yeah. Start with the no. Yeah. And then if you're if you're going through a rough time and you're getting all kinds of invites or you're getting asked to do a bunch of things, you know, maybe you go through a season of no. And you just focus on what needs to be done.

SPEAKER_03 20:14

The one document everyone should review, net worth statement. Can you elaborate on that one?

SPEAKER_02 20:20

Yeah, I think if we're gonna boil something down to one document, the biggest bellwether of your financial habits is putting together your actual overarching picture. So net worth, I think, captures, hey, are the behaviors that are the behaviors that I'm engaging in actually benefiting me? And if you're year over year you see your net worth go up, right? Or year over year you see it go down. And if it's going down, you you need an answer as to why. If it's going up, you get that boost, that little that little feeling of, oh yeah, you know I did good. Or maybe it didn't go up as much as you hoped it would. You say, Oh, well, where can I what do I need to do to adjust? Yeah. And you know, like everybody starts out, or most start out with some some kind of negative net worth, right? You go through school, you come out with debt, or you get a house and you have a mortgage, and maybe the property value goes down, right? It it's okay. But you have this arching bellwether year over year where you can track what's going on.

SPEAKER_03 21:26

I think it's so hugely important. Is your net worth increasing? Um, and I also think you can get how you know whether your net worth is diversified enough. You know, uh what's the ratio between your qualified money, uh your pre-tax money versus your Roth money? What percent of your net worth is invested in real estate? What percent is invested in crypto? Uh-huh. Um but uh do you have that cash reserve sitting in a bank to cover you for six months if something were to happen? Um All of that, there's a there's a lot you can get from from that net worth statement, even you know, high interest debt, you know, I uh you know, is that a is that a major part of your net worth? And you know, so I think that's a great one page summary to look at and get started with and start asking questions.

SPEAKER_02 22:17

Yeah, I I think and I think it's one of those documents where it's the wrong mindset to approach it and look at it and feel bad, or look at and feel look at it and feel like I'm done. Right. I think the two good ways to look at a net worth statement are for motivation or for comfort. Right? You're going through a rough time, you've done all that you can up to this point. You look at your net worth statement, you're you're doing okay, you get that level of comfort. And then if it's not where you want it to be, you should get a level of motivation from that.

SPEAKER_03 22:48

All right, let's cover one more. You mentioned budget for uh for the conversation every couple should have. This is another significantly important and one of the biggest, biggest drivers. I mean, cash flow drives the financial plan, but a lot you got to elaborate on that one. Yeah.

SPEAKER_02 23:06

So there, I mean, there are personal life lessons that I've learned in this. Um, there are observed life lessons that I've learned, right? On the budgeting side, having some communication of what's coming in versus what what's going out, I think is probably the most important thing you can do as a couple. And the reason I say that is I I mean I'll I'll use my example, right? Get done with get done with school. My wife's in grad school, we're working, she's getting a stipend because she's a she's a scientist and she's smarter than I am. Uh we we get out, she gets her first industry job, and we're we're living in a rundown apartment behind behind the the restaurant in Newmarket. And you get to this point of like, oh, we're we're barely getting by with paying off our paying our student loan payments and our rent and our utilities and so on and so forth. We're like, we're skipping date nights and um we're saying yes to too many things we don't want to do. And then we never had a conversation about what what the income she was now bringing in as an industry scientist was what impact that was having on the savings account. And uh finally, I one night we just sat down and was like, so how much money are you making? And you know, I'm a little embarrassed because I was in I had been a financial planner for a couple years at that point, but yeah, it like we were able to then from having that conversation set budgets where we could enjoy life a little bit and meet our goals. Just because like we didn't have that communication before then, we were on two separate paths where it was just like, oh yeah, I like I guess I just gotta work more.

SPEAKER_03 24:47

Is that what inspired you to create the measured wealth uh budget budget tracker?

SPEAKER_02 24:53

Uh partially, yeah. Yeah, it it it's always been kind of a I mean, as you can tell from like personal experience, it's kind of a a passion of mine because when you when you have a clear a clear view of the tools you have in the toolbox, making a plan on how to build the thing you're trying to build gets a lot easier. The other reason I think people should the budget is probably one of the more important conversations to have is there's always a spender and there's always a saver in a relationship. In all the conversations I've had with people doing co financial planning, there's almost always one person whose mindset is the more, right? They they can always work more, they can always make more money, they wanna, they want greater things. And then the other side of the relationship will be comfort, they want security, safety, right? And those are that's it's kind of an important yin and yang, right? It's it's gonna make a successful pair. But having a level set where you're meeting the needs of the person of the spouse that wants safety and at the same time giving room to chase more or to enjoy more, I think makes for makes for a better time. And it makes it makes the behavioral side a lot easier, right? If you if you can put parameters on on allowing certain behaviors like going out to eat or traveling or how much somebody's saving, right? Because there is a case where somebody's saving too much and not spending enough, because you stop enjoying life at a point.

SPEAKER_03 26:24

Yeah. We don't want to do that. Um all right, Joe. Uh, this has been a great podcast. Any final thoughts you want to share?

SPEAKER_02 26:34

Anything you want to put out there? Your advisor wants to talk to you. We love answering questions. So instead of taking the next mid-year review to listen to us awkwardly fill in the silence with investment performance, bring the things you're worried about. Right? Bring the questions you have.

SPEAKER_03 26:50

Excellent. And this will be a good time to say for our listeners out there if today's conversation has you thinking about where you stand for the second half of the year, give our office a call. We'd be glad to set up a review. And with that, Joe, thanks again for joining me today. And thanks everyone for tuning into Financial Futures, a Measured Wealth Podcast. If you enjoyed today's episode, be sure to follow or subscribe on your favorite podcast app so you never miss an update. Want to learn more or get in touch? Head over to measuredwealth.net where you'll find prior episodes, helpful financial planning guides, and more. You can also call us at 603-431-1444, or email at info at measuredwealth.net. That's info at measuredwealth.net. Thanks again for listening. And remember, the future will someday be the present. Thanks, everyone.