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A mid-year financial checkup is a smart move


Whether you established a plan at the beginning of the year or not a midyear review of your finances can be very beneficial for your financial health going forward.  There is still plenty of time to develop strategies to resolve any problems that could be looming in the future.
Where should we start with our financial review?
The first place is spending. Are you really achieving your budget on a regular basis or do you need to update your plan to reflect your actual spending habits?  And if you haven’t been really been following your budget, now is a really good time to recommit to following your budget.
What about a review of your debt?
The best place to start is to look at your credit card debt.  Hopefully you are lowering this number. If it is increasing or staying the same, that is a troublesome sign.  If you have eliminated this debt, make sure you are saving for your next big expense with the money you were paying to your credit card.  This will help to make sure that your credit card debt doesn’t get out of control again.
Is there any other debt review to complete?
If you are going to purchase a new home or car, now would be a good time to make sure you understand how that new debt will impact your monthly spending habits. Those payments will likely be higher than your current payments.  Don’t make a new purchase that has a long repayment term without making sure that you can really afford the payments.     
What should be scrutinized regarding our savings?
The most important is to review your emergency fund balance. Compare the amount you have saved tot to how much money you would need to cover the latest three months’ worth of expenses. Even if you are saving regularly, your expenses might have increased causing you to have a shortfall.  The goal is to get to at least six months of expenses covered by your emergency fund.
What are considerations for investments?
If you have investments such as mutual funds or stocks, it is always good to review your portfolio and determine if you need to rebalance to achieve your desired asset allocation. Also make sure the risk in your portfolio hasn’t changed dramatically since the beginning of the year.  If you have a 401k, this could be an opportunity to increase your deduction amount and get closer to or exceed the 10% towards savings. Even if you can increase it just by 1%, that is a worthwhile change to make now rather than later.
What are other mid-year items to review?
One very good exercise is to look what you are doing with your raise.  Did you start saving more, paying more towards debt, or did it just get absorbed into your monthly spending and the raise wasn’t even noticeable?  This little exercise is often surprising because our tendency is to make no decision about our raises and just increase out spending because we have additional dollars available..
What’s the biggest benefit to performing a mid-year review?
Knowing where you money is going is the first step towards an improved financial situation.  The second step is using that knowledge to make smarter decisions about what you will do with your money on a monthly basis.  Waiting a whole year to know this can create a financial situation that is difficult to overcome.

Posted: 6/25/2015 with 0 comments

Categories: Money Matters, Planning

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