Mid-year good time to reassess finances

The start of a new year is a good time to adjust financial strategies and make money-oriented resolutions. But a thorough review around the middle of the year also can make sense, especially amid a tough economic climate like the present.

Here are several areas that any review should cover:

•Your net worth – A high or rising net worth will open many doors for you. It’s also a sign that your financial situation likely remains on track, while big asset declines or increases in debt are warning flags.

Calculate net worth by adding up assets, including housing equity, and subtracting debts. Don’t include personal belongings unless they could be sold readily in a pinch.

•Investment portfolio – With many stocks and equity mutual funds down sharply this year, now’s a good time to assess your portfolio. With a suitable balance of volatile and conservative holdings, you’ll be better able to handle bumpy patches in the market and exploit opportunities.

•Retirement planning – With the demise of traditional pensions, more Americans must oversee their own retirement plans, yet many people are behind on the task. The median 401(k) account has less than $20,000 in it, and individual retirement accounts (IRAs) are underutilized.

Start by funding workplace 401(k)-style accounts to trigger employer matching funds. After that, consider adding unmatched money to your 401(k) plan or diversify into an IRA or annuity. Select a Roth IRA for tax-free withdrawals.

•Credit-card terms – Even if you pay your card balance in full, stay alert to fees and changes to account terms.

“A lot of creditors have been increasing interest rates and lowering credit limits,” said Michael Sullivan, director of education for Phoenix debt-counseling firm Take Charge America.

Credit-card firms mail notices to customers when they change fees, interest rates and terms.

“You need to read those announcements,” Sullivan said.

•Income taxes – Assess your situation at midyear to make use of tax breaks for 2008 while there’s time. Strive to avoid owing a big tax liability next April or receiving a large refund, as the latter represents an interest-free loan to Uncle Sam.

As a rule, defer income to next year and utilize deductions and credits this year.