How to do a Midyear financial checkup review in 30 minutes
Here's how - A mid-year financial check-in is essential to ensure we’re on track to meet our goals and to make any necessary adjustments. As we find ourselves midway through the year, it’s the perfect time to take a moment and reflect on our financial journey so far. Summer is a great time to do a financial check-up. Here’s why: typically, the days are longer, you’re more focused on self-care, you’re outdoors more, and you’re in a reflective mode. It's an ideal time to sit down, pull out your laptop, and review your financial outlook.
Let’s dive into some key areas to review and optimize for the remainder of 2024!
Be sure to download the PDF workbook, which you can print out and fill in to make this task easier. You should be able to complete the financial check-up in 30 minutes or less!
1. Review Your Financial Goals
Make use of this reflective time to reassess and realign your financial plans, ensuring you're set up for success for the rest of the year.
The very first step is to pull out those goals from January. Every January, we sit down and create a list of things we want to accomplish for the year. What did you write down for your financial goals? It’s time to assess your progress.
Revisit the goals you set and decide if you’re on track to achieve them. If not, determine what needs to be done to ensure you meet them by December.
You may need to adjust some of your goals. Your financial goals should reflect any changes in your circumstances or priorities since January.
Assess Progress:
What financial goals did you set at the beginning of the year?
Are you on track to achieve them? Why or why not?
Adjust Goals:
Have your circumstances or priorities changed?
What adjustments need to be made to your financial goals?
<<Click the image to download the workbook!>>
2. Analyze Your Budget
The very next thing you need to do is actually pull out your budget. Now, you’re going to review the items in your budget, such as the categories, frequency of bill payments, etc. One area people often miss is tracking the actual amounts of their bills. When you receive your electric bill, you should update your budget with the exact amount every month.
I use a budget that allows me to view the entire year on one spreadsheet. Each column represents a different month, so in January, I can update my electric bill with the exact amount rather than using an arbitrary figure like $100. This way, next year, I’ll have a better idea of what my bill should be based on prior years.
You also want to track your spending. How are you keeping up with what you’re spending each month? In my budget spreadsheet, I have a row for credit cards. At the end of each month, when I get my credit card statement, I update that column. I exclude items I’ve already budgeted for, such as gasoline and groceries. Anything above and beyond those amounts gets tracked in my spreadsheet, helping me keep up with my actual spending. Since I do most of my spending on my credit card rather than cash or debit, it’s easy to track.
Another helpful tip for budgeting is to constantly add new rows for expenses that pop up throughout the year. For example, if you find out about a specific donation that will happen annually, add that row. Or, if there’s something specific for your child, like basketball or gym fees that renew every May, make sure to include that in your budget.
If you don’t have a budget spreadsheet, be sure to download the Budget Bestie spreadsheet. It's totally free and a very useful tool for tracking your expenses and income.
Track Spending:
Review your spending habits over the past six months. Are there areas where you can cut back?
Update Budget:
What changes need to be made to your budget to better align with your financial priorities?
3. Evaluate Your Savings
Next, we’re going to evaluate how much money we have put aside for savings, both for short-term goals and long-term plans. The most immediate need is typically an emergency fund. You don’t want to cash out part of your 401(k) to cover a water heater or automobile repair if you don’t have to, because you'll typically incur fees and penalties, and it can be a real headache to get the money sent to you.
So, where are you at this point in the year with your emergency fund? Do you have enough? I always tell people to make sure they have enough money to sleep better at night. For some, three months of expenses may not be enough; for others, six months might not be sufficient. It’s totally up to you. What will help you feel secure if you were to lose your job and be without income for six months?
You also want to look at your retirement savings. Are you saving enough to meet your retirement goals, especially your early retirement goals? If you want to retire in the next 10 years, are you saving at least 30-40% of your income before taxes? Check to see if you’re on track with saving the amount you need for early retirement, and consider increasing your contributions if necessary. Look into your 401(k), 457 plans if available, and of course, the Roth IRA, which is a great vehicle for early retirement savings.
If you’re unsure where you stand with your retirement savings and whether you’re on track to hit your retirement age goal, definitely visit achieveher.com and check out the resources available, including a free financial retirement calculator download.
Emergency Fund:
Is your emergency fund adequately funded? (Aim for three to six months’ worth of living expenses.)
Retirement Savings:
Are you contributing enough to your retirement accounts to meet your goals?
Consider if you can increase your contributions.
4. Debt Management
Now, the next section is really important: debt management for early retirement. It’s crucial to eliminate as much debt as possible because debt creates bills. When you retire, if your expenses are low and you have very few bills, you need less money to live on. The more bills you have, the more money you need. That’s the philosophy behind financial independence and early retirement (FIRE).
Assess your progress in paying down your debts. Your house is something you’ll typically have for a while because it’s such a large purchase, but outside of your home, where are you with repayment plans for things like your automobile, credit cards, loans, and any other debts? Consider refinancing or consolidating to save on interest.
Your credit score is also crucial for refinancing, and if you want to buy a new home or get a new vehicle, you’ll need a great credit score to get the best interest rates. To achieve this, make sure you are paying your bills on time, which will help increase your credit score.
What are some other strategies you can think of to improve your credit score?
Debt Reduction:
Assess your progress in paying down debt. Are you on track with your repayment plans?
Credit Score:
Review your credit report for any inaccuracies.
What steps can you take to improve your credit score?
5. Investment Review
Now for the fun part—reviewing my investment portfolio! I usually do this monthly, not just every six months. Every month, I go into my portfolio to see what's working and what's not. By that, I mean identifying which investments are giving me positive returns (greenlight) and which are giving me negative returns (red).
I also compare the performance of my portfolio with that of the S&P 500. For instance, if the S&P 500 has gained 15% this year but my portfolio is only at 10%, I want to understand why. It could be because I have some bonds or income-related investments that are bringing down the overall performance, as I don’t have my portfolio in 100% stocks. However, my portfolio should still align reasonably well with the S&P 500.
If I find a fund or ETF that is underperforming, I typically rebalance my portfolio by making adjustments. This could mean adding more to that particular fund if I believe it's still a good investment despite its current downturn. Essentially, I buy what's on sale.
I also ensure that my risk tolerance aligns with my goals. Since I’m already living off my portfolio, it's important not to have it too heavily weighted in risky stocks. As you get closer to retirement, you’ll want to have less money in high-risk stocks. Additionally, consider other adjustments like rolling over an old 401(k) from a previous job or moving some funds into a high-yield savings account.
Portfolio Performance:
Evaluate the performance of your investments. Are they aligned with your risk tolerance and financial goals?
Rebalance Portfolio:
What adjustments need to be made to your investment portfolio?
6. Maximize Tax Benefits
Hang in there, we’re almost done! Next, let's maximize your tax benefits. Start by reviewing your tax situation—take a look at your paystub to identify any opportunities for tax savings. Consider using tax-advantaged accounts, such as a 401(k). Contributing more to your 401(k) reduces your taxable income today, which means you'll pay less in taxes on your paycheck. You won't pay taxes on that money until you retire and withdraw from the 401(k), potentially saving you a lot of money now.
Another way to save on taxes is with a Health Savings Account (HSA). If you have a high-deductible health plan, you can contribute to an HSA. The money you put into an HSA is tax-free and can be used for medical expenses like co-pays, prescriptions, and other healthcare needs, also tax-free.
Tax Planning:
What tax-saving opportunities can you explore?
Tax Deductions:
List any potential deductions and credits you can utilize next year.
7. Insurance Check-Up
Insurance is something we don’t typically like to think about—it just seems like another bill. However, it’s important to do an insurance check-up every year. Start by reviewing all your coverages, especially for auto and home insurance. Take about an hour to call around and get new quotes; you could save a significant amount of money.
Next, evaluate your health insurance. See if there are any optimizations you can make. Call your benefits department at work or, if you’re self-employed, shop around for better rates. Check if a high-deductible plan might be more beneficial than a PPO plan.
Finally, assess your life insurance. Ensure you have enough coverage in the event of an untimely death and that everything is in place to care for your loved ones. Update your policies and, if you have a will or trust, make sure to include the new insurance information.
Coverage Review:
Is your insurance coverage (health, auto, home, life) adequate and up to date?
Policy Adjustments:
What adjustments need to be made to your policies?
8. Plan for the Future
Last but not least, definitely set new goals to reach by the end of the year. I’m a big proponent of goal setting and writing down your goals, placing them somewhere visible so you’re constantly reminded of what you’re striving for. There’s no point in working hard or hustling in your side business just to stay in the same situation. Make sure to continue pursuing your goals. What new financial targets will you set for the second half of the year? And of course, celebrate! Celebrate finishing this review, and hopefully, it didn’t take you too long to complete your midyear check-in.
Set New Goals:
Use this space to set new financial goals for the second half of the year.
Stay Motivated:
Celebrate your progress and write down what motivates you to continue working towards financial independence.
Remember, AchieveHers, financial wellness is a continuous journey. Taking the time to conduct a mid-year financial check-in helps you stay proactive and in control of your financial future. Let’s finish the year strong and continue to empower ourselves through smart financial decisions!
Stay Happy, Healthy and Wealthy,
Warm regards,
Dr. Lakisha L. Simmons
Lakisha L. Simmons, Ph.D. left her full time position as a tenured professor of analytics financially independent at 41 years old. She is the author of The Unlikely Achieveher and CEO of BRAVE Consulting where she facilitates The Wealthy AchieveHer Mastermind to help women how to make, save and invest more money to early retire. She enjoys traveling, exercising, and spending quality time with her family. She can be reached via LakishaSimmons.com or on social media at @drkishasimmons
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