June Dollars and Sense: Your Mid-Year Financial Check-Up
- Davina Jackson
- Jun 12, 2024
- 10 min read
Updated: Jun 19, 2024
Welcome to The Woman CFO – a space crafted just for you, where we embark on a journey of financial empowerment.
As we hit the halfway mark of the year, it's the perfect time to pause and take a closer look at our finances by performing a mid-year financial check-up.
In our opinion, a mid-year financial check-up is one of the best and smartest moves you can make with your money (other than saving and investing). That's why it's important to know how to complete one.
In today's blog post, we're going to outline a quick and simple process you can use to assess your financial health. It will help identify any areas that may need attention and show where to make adjustments - ensuring that you stay on track to reach your goals.
Are you ready to get started? Let's go.
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Assess Your Current Financial Situation
The best way to start anything is to assess the situation. As it applies to your money, this is where you will take a good look at where you stand financially.
Think of it like stepping on a scale to check your weight - except instead of pounds, we're measuring your financial health.
Here's what you'll need to do:
1. Review Your Income and Expenses
Add up how much money you've brought in so far this year. Review your bank statements, pay stubs, and any other sources of income you have.
Next, look at your expenses. Include everything from rent or mortgage payments to groceries, utilities, and entertainment. Then, add up how much you've spent in each category.
Then, calculate your disposable income by subtracting your expenses from earned income.
Example: Let's say you've earned $30,000 in income this year and spent $20,000 on expenses. That leaves you with $10,000 in disposable income.
2. Check Your Savings and Emergency Fund
Check your savings account balances and any other accounts you've been stashing money away in. Are you on track to meet your savings goals for the year?
Next, look at your emergency fund. Ideally, you want to have enough money saved up to cover at least three to six months' worth of living expenses in case of an unexpected emergency.
Example: If your goal was to save $5,000 by the end of the year and you've only saved $2,000 so far, you may need to adjust your savings strategy to catch up.
3. Evaluate Your Debt Levels
Take a look at any outstanding debts you have, such as credit card balances, student loans, or car loans. How much do you owe in total?
Consider how much progress you've made towards paying off your debts. Are you on track to meet your repayment goals, or do you need to make some changes?
Example: If you have $10,000 in credit card debt and your goal was to pay off $2,000 by now, but you've only paid off $1,000, you may need to adjust your budget to allocate more money towards debt repayment.
By taking the time to assess your current financial situation, you'll gain valuable insights into where you stand and what adjustments you may need to make to stay on track with your goals.
Revisit Financial Goals and Adjust as Needed
Now that you have a clearer picture of where you stand financially, it's time to revisit those financial goals you set at the beginning of the year.
By reviewing your goals (and adjusting them as needed), you'll ensure they remain relevant and achievable given your current circumstances.
Here's how to do it:
1. Review Your Goals
Take a look at the financial goals you set for yourself at the beginning of the year. This could include goals like saving for a vacation, paying off debt, or building an emergency fund.
Consider whether these goals are still relevant and achievable based on your current financial situation and any changes that may have occurred since you set them.
Example: Let's say one of your goals was to save $3,000 for a summer vacation, but due to unforeseen expenses, you've only managed to save $1,500 so far. You may need to adjust your vacation plans or find ways to save more money to reach your goal.
2. Adjust Your Goals as Needed
Be flexible and willing to adjust your goals as needed. Life is full of surprises, and it's okay to change course if necessary.
Consider whether you need to make any changes to your goals based on your current financial situation, priorities, and any new opportunities or challenges that have arisen.
Example: If you've realized that saving $3,000 for a vacation by the end of the year is unrealistic given your current income and expenses, you may decide to adjust your goal to $2,000 or postpone the vacation until next year.
3. Set New Goals if Necessary
If you've achieved some of your original goals or find yourself with extra resources, consider setting new financial goals to keep yourself motivated and on track.
Think about what's important to you and what you want to accomplish with your money in the second half of the year.
Example: Maybe you've paid off one of your credit cards ahead of schedule and now have extra money each month. You could set a new goal to pay off another credit card or start saving for a down payment on a house.
Remember, goals are like roadmaps - they help guide us toward our desired destination. But sometimes, the road takes unexpected turns, and we need to adjust our route.
Review Your Budget
Alright, let's talk budgets. If you're like most people, the word "budget" might make you cringe a little. But trust, it's not as scary as it sounds!
Change your thinking and start seeing your budget as your financial roadmap. It will help you stay on track with your spending and ensure you're making progress towards your goals.
Here's how to review yours:
1. Gather Your Budgeting Tools
If you already have a budget in place, gather all your budgeting tools - whether it's a spreadsheet, budgeting app, or good old-fashioned pen and paper.
If you don't have a budget yet, we say this with love: YOU NEED A BUDGET. You can easily create one with a budgeting app, an excel spreadsheet, or simply writing down your income and expenses on paper. (Shameless plug: We created a few free budget resources. Grab them here)
Example: Let's say you use a budgeting app to track your spending. Open up the app and take a look at your spending categories and how much you've spent in each one so far this year.
2. Track Your Spending
Review your spending for the year so far and compare it to your budgeted amounts. Are you spending more or less than you planned in each category?
Look for any areas where you may have overspent or underspent, and think about why that might be. Be honest with yourself.
Example: You budgeted $300 per month for groceries, but you've been consistently spending $400 per month. Maybe you've been eating out more often or buying more expensive groceries than you planned. If it's truly inflation, you may want to look into ways to shop around for best prices.
3. Identify Areas for Adjustment
Identify any areas where you may need to adjust your budget. This could involve reallocating funds from one category to another or cutting back on discretionary spending.
Be realistic about what you can afford and prioritize your spending based on your financial goals.
Example: If you've been overspending on groceries, you could try meal planning and shopping with a list to help stick to your budget. Or, if you've been spending more than you planned on dining out, you could limit eating out to once a week instead of multiple times.
4. Make Adjustments to Your Budget
Once you've identified areas for adjustment, update your budget. This may involve lowering your budgeted amounts in certain categories or finding ways to increase your income to cover additional expenses.
Remember, your budget is a living document that can and should be adjusted as needed to reflect changes in your financial situation and priorities.
Example: You decide to reduce your grocery budget to $350 per month and allocate the extra $50 towards paying off your credit card debt faster.
By reviewing and adjusting your budget regularly, you'll ensure that you're staying on track with your financial goals and making the most of your money. Don't be afraid to experiment and find what works best for you - it's all part of the financial journey.
Evaluate Your Savings and Investments
Now, let's talk about the money you've been setting aside for a rainy day and the investments you've made to grow your wealth.
Here's how to do it:
1. Check Your Savings Accounts
Take a look at your savings accounts and see how much money you've saved up so far this year. This includes your regular savings account and any other accounts you may have like a high-yield savings accounts or a certificates of deposit (CDs).
Compare your current savings balance to your savings goals to see if you're on track.
Example: Let's say your goal was to save $5,000 by the end of the year, and you've managed to save $3,000 so far. You're making good progress, but you may need to ramp up your savings efforts to reach your goal on time.
2. Assess Your Investment Portfolio
If you have investments, such as stocks, bonds, mutual funds, or retirement accounts, take some time to review their performance.
Review how your investments have performed so far this year compared to your expectations and any benchmarks you may be tracking.
Example: If you invested $10,000 in a diversified portfolio of stocks and bonds at the beginning of the year and it's now worth $11,000, you've earned a 10% return on your investment. That's great news, but it's important to consider the overall performance of your portfolio and whether it aligns with your investment goals and risk tolerance.
3. Re-balance Your Portfolio if Needed
Depending on your investment strategy and goals, you may need to re-balance your portfolio to maintain your desired asset allocation.
If certain investments have performed better or worse than expected, you may need to buy or sell assets to bring your portfolio back in line with your target allocation.
Example: Let's say your target asset allocation is 60% stocks and 40% bonds, but due to the recent stock market rally, your portfolio is now 70% stocks and 30% bonds. You may need to sell some stocks and buy more bonds to re-balance your portfolio and reduce your exposure to stocks.
4. Consider Adjustments to Your Savings and Investment Strategy
Based on your evaluation, consider whether you need to make any adjustments to your savings and investment strategy.
This could involve increasing your savings contributions, changing your investment allocations, or exploring new investment opportunities.
Example: If you're behind on your savings goals or your investment portfolio isn't performing as expected, you may need to increase your savings rate or adjust your investment strategy to better align with your goals and risk tolerance.
By evaluating your savings and investments regularly, you'll ensure that you're making progress towards your financial goals and maximizing the growth of your wealth.
Check Your Credit Report and Score
Now it's time to talk credit reports and scores - another subject (other than budgeting) that can make you cringe. But, again, trust us. It's not as bad as you think.
Your credit report and score are like your financial report card - they show lenders how responsible you've been with borrowing money and managing your debts.
It's important to check your credit report and score regularly to monitor your financial health and ensure there are no errors. It's also a good time to see if there's room for improvement.
Here's how to do it:
1. Obtain Your Credit Report
You're entitled to one free credit report from each of the three major credit bureaus - Equifax, Experian, and TransUnion - every 12 months. Visit AnnualCreditReport.com to request your free reports.
Review each report carefully to check for errors, such as incorrect account information, fraudulent activity, or identity theft.
Example: You pull your credit report from Equifax and notice that there's an account listed that you don't recognize. It could be a sign of identity theft, so you'll want to dispute the error with the credit bureau and credit card company right away.
2. Check Your Credit Score
While your credit report contains detailed information about your credit history, your credit score provides a snapshot of your creditworthiness. Many banks and credit card companies offer free access to your credit score through their online portals.
Check your credit score to see where you stand. Scores typically range from 300 to 850, with higher scores indicating better creditworthiness.
Example: You check your credit score and see that it's 720. This falls within the "good" range, but you may still have room for improvement. Aim to maintain or improve your score by paying bills on time, keeping credit card balances low, and avoiding new credit inquiries.
3. Address Any Issues or Errors
If you find any errors or discrepancies on your credit report, take steps to address them promptly. This may involve contacting the credit bureau to dispute the error and provide supporting documentation.
Addressing errors or fraudulent activity on your credit report can help protect your credit score and prevent future financial headaches.
Example: After disputing the error on your credit report, the credit bureau investigates and removes the incorrect account from your report. As a result, your credit score improves, giving you greater access to credit and better loan terms.
4. Monitor Your Credit Regularly
Make it a habit to check your credit report and score regularly, ideally at least once a year. Monitoring your credit can help you detect any signs of identity theft or fraudulent activity early on and take action to mitigate any potential damage.
Example: You set a reminder on your calendar to check your credit report and score every six months. By staying vigilant and monitoring your credit regularly, you're able to catch any issues before they escalate and protect your financial well-being.
By checking your credit report and score regularly, you'll not only ensure the accuracy of your credit information but also take proactive steps to maintain and improve your creditworthiness. It's an essential part of your overall financial health and well worth the time and effort.
Mid-Year Financial Check-up Recap
If you made it this far, you've completed your mid-year financial check-up! Give yourself a pat on the back because you've just taken a big step towards financial health and well-being.
As we wrap things up, here are a few key takeaways to keep in mind:
1. Knowledge is Power
By taking the time to assess your current financial situation, revisit your goals, and review your budget, savings, investments, and credit, you're empowering yourself to make informed decisions about your money.
2. Small Steps Lead to Big Wins
Improving your finances doesn't have to happen overnight. By making small, manageable adjustments to your budget, savings, and investment strategy, you'll gradually build momentum towards your goals.
3. Stay Flexible and Adaptable
Life is full of surprises, and your financial plan should be flexible enough to accommodate unexpected changes and challenges. Don't be afraid to adjust your goals and strategies as needed to stay on track.
4. Celebrate Your Progress
Take a moment to celebrate how far you've come. Whether you've paid off debt, increased your savings, or improved your credit score, every step forward is a victory worth celebrating.
5. Keep Learning and Growing
Financial literacy is a lifelong journey, and there's always something new to learn. Stay curious, ask questions, and seek out resources to continue improving your financial knowledge and skills.
Remember, your financial well-being is worth investing in. By taking proactive steps to assess and improve your finances, you're laying the foundation for a brighter financial future.
Keep up the great work, and here's to your continued success!
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