Time for a Mid Year Financial Check Up

Financial Check Up
Time to perform a financial check up.

With the summer upon us, and half the year now gone, I realized it’s probably a good time to review my financial progress so far this year. It’s a great idea to at least do an annual review, but a mid-year review helps you align your financial plan to ensure you stay on track, especially if you are looking to become financially independent and retire early.

These are the steps I took to reviewing my financial progress, and I suggest using them to take a look at where you are this year. A mid-year review can help you create new financial habits before the end of the year to finish the year strong, and ensure you are readily prepared financially for any future events.

Step 1. Review your goals

Your Goals Are Within Reach
Review your goals

You should be setting financial goals at the beginning of the year, and mid-year is a perfect time to check your progress. For example, if your goal was to add $5,000 to your emergency fund this year, you should already have saved at least $2,500. If not, set some monthly milestones to catch up. When you have a goal, your best bet to achieving it is to track it. You can use pen and paper, but there are lots of online tools available to you too.

“Discipline is the bridge between goals and accomplishment.” ~Jim Rohn

Step 2. Analyze Your Spending

Track your expenses
Analyze your spending

At the beginning of the year, a lot of us make financial resolutions and start watching what we spend money on. After a month or two, we often stop tracking and start going back into old habits – buying coffee and lunch every day, giving in to impulse purchases, not planning your grocery shopping.

If you find you are going back to old habits and don’t know how much you are really spending, start tracking your expenses for the next 30 days. Track every penny by category to identify where your money leaks are. After you see how much you are spending in a certain area, it helps stop your overspending and gets your savings back on track.

Step 3. Evaluate your investments

You should be able to easily go online and download you recent bank, investment and retirement account statements. What is the mix of cash, stocks, and bonds? The right mix depends on your risk tolerance (mine is pretty low), your age, and investment goals. How are those investments performing? If your investments look like they need a re-charge, there are plenty of ways to re-allocate and invest. Mutual funds and ETF’s are the best options as they tend to follow the market, and are lower in cost.

Evaluate your investments
Evaluate your investments

Also, if you work for a company with a 401(k) plan, make sure you are enrolled and take a look at how much you are contributing. Are you contributing enough to get the full company match? If not, bump up your contribution; after all, that’s free money. If you are struggling to understand your options talk to someone in your Human Resources department as they are generally very willing to help. If you don’t have a company 401(k) plan, you can contribute to a traditional IRA. There are some tax rules that may limit contributions, so it would be beneficial to read up on them before you contribute. (You could also make this one of your financial goals and set milestones to start a retirement account soon.)

Step 4. Check Your State and Federal Tax Withholding

If you’ve had any major life changes – marriage, divorce, children, job change – your tax withholding might be inaccurate. This can cause you to pay too much or too little in tax resulting an unexpected result during tax preparation time next year. Additionally, also take a look at your prior year tax returns to understand why you over or under paid. If you are paying too much, you are basically giving the government an interest-free loan, but if you are paying too little, you could be hit with a tax penalty. Yikes!

Step 5. Pull Your Credit Report

Pull your credit report
Pull your credit report

Go to AnnualCreditReport.com to get a free copy of your credit report. Review your credit history to see if there are any changes or anything you don’t recognize. Also, check for errors and dispute them with the credit reporting agency if needed. This is also a great resource to understand all the debt you have outstanding and make a plan (if you don’t have one already) for paying down your debt, especially any past-due accounts.

Step 6. Update your budget

Goals and budgets are often created at the beginning of the year when you set your goals, and mid-year is a great time make adjustments. You may realize you are routinely spending more in one category than another, so it makes sense to realistically adjust your budget. You can compare the spending you tracked above to what you thought you’d spend and adjust as needed. For example, I thought I would spend $100 a month on household stuff (toilet paper, cleaning supplies, personal toiletries), when I actually only spend about $25 a month on average. I can adjust my budget and use that money to cushion my savings instead.

Once you’ve taken a look at your expenses, income, investments and debt, you will have a great idea if you can achieve your goals by the end of the year. If your goals don’t look achievable by year-end, don’t fret, just re-calibrate your budget. Life sometimes interrupts your goal progress, but never let it stop you. Take some time today to do a mid-year financial check up. Spend wisely, save more… and always enjoy the journey!

“A budget is telling your money where to go instead of wondering where it went.” ~Dave Ramsey

4 thoughts on “Time for a Mid Year Financial Check Up

  1. Jennifer,
    This is a great reminder for those who live with a budget. The mid year check up will give me some ideas where I need to adjust.
    Your six steps are very on point for me, I live on more of a fixed income, as I am retired from the everyday workforce.
    I have not used the credit report as a part of my check up in the past, looks like I need to add this to my list.
    Having a fixed income makes it easier to keep a budget on track, getting extra money from side jobs helps with fun money. What do you think should be the percentage of monthly income related to having fun, movies, traveling or eating out at a premium place.
    John

    1. Hi John – Reviewing your credit report a couple of times a year is a good step in reviewing your finances to ensure that everything looks good and you don’t have anything on there you didn’t approve.

      I’m rather frugal, so I don’t allocate much to my “fun” budget since I’ve found a lot of things you can do for free, like borrowing books, DVDs, music, and passes for local attractions from the library. It also depends on how much your necessary expenses take out of your budget – like housing, utilities, food, etc. since you don’t want to compromise and be stressed every month about not being able to pay for those things. Everyone has their priorities to generate the happiness and  balance in their life. Choose wisely, spend wisely! ~Jen

  2. I really like your website. Step two can easily be accomplished by using Mint. I really like Mint because it connects to your bank account and pulls all your transactions in automatically and categories them. You can even make your own budget on Mint. It also helps you set specific money goals.

    1. I like Mint too, it’s a great tool to help you track your expenses and get all of your accounts (bank accounts, credit cards, loans, etc.) consolidated in one place. Thanks for the tip!

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