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How to Give Yourself a Mid-Year Financial Check-Up
How to Give Yourself a Mid-Year Financial Check-Up
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How to Give Yourself a Mid-Year Financial Check-Up

Money254
Ian Job
June 21, 2022

Remember those new year resolutions you set six months ago? Well, it's June now. Time to know how you are fairing. Can you pat yourself on the back or are you sinking in despair for veering off your goals? 

Whichever the case, you still have time to make adjustments and finish 2022 on a high. As such, it is time to do the mid-year financial check-up and get back on track without delay.

What Is a Mid-Year Financial Check-Up?

A mid-year financial check-up is the examination of all the critical aspects of your personal finances from income, to savings, expenses, and investments with the aim of coming up with the optimal course of action to get the best results by the end of the year. 

You review the goals you had set at the beginning of the year to determine the true level of success or failure and then, depending on the status, you make adjustments as necessary.

Go through the steps below to discover your current standing and develop strategies to enable you to accomplish your financial goals by the end of the year.

1. Do Your Goals Reflect Your New Circumstances? 

A lot can happen in six months and most likely either your income or financial needs have changed since the beginning of the year. If these have remained constant, it is likely that external events in the economy have had some influence on your finances. 

Where you are now, and your circumstances may not be perfect. Certain life changes can affect your finances positively or negatively.

Maybe you got married, had a baby, or even got promoted at work. For instance, how has it affected your finances if you now have a baby? By assessing the prevailing situation, you can redefine your goals to reflect your current situation.

Inflation too has risen to 7.1%, which means almost everything is costlier than it was in January. How has this affected your budget? Is it time to live in a cheaper apartment, or maybe, it's time to launch that side hustle you have been postponing? 

You are doing yourself a disservice if you haven’t realigned your financial goals with your current circumstances. The second best time to do so if you haven't already is now! 

Read On>> Money Mastery: How to Set & Actually Achieve Your Financial Goals

2. Fill in the Holes in Your Financial Plan

A financial plan typically contains:

  • Your current financial state.
  • Long-term monetary goals.
  • The strategies you intend to use to attain the goals.

Does your current situation resonate with your goals? If not, identify the loopholes as you look into your retirement savings, investment goals, risk management strategies, and long-term investment objectives.

You might have to adjust your budget to cover all areas appropriately. It also includes monitoring your expenses to ensure there's no wastage. Then, if you identify missing elements in the plan, you can fill them appropriately.

For example, you can eliminate or cut back on lifestyle operating costs that may be difficult to maintain in times of tight cash flow (for example, memberships or subscriptions, shopping patterns, dining out, and so on). It thus presents an opportunity to trim the budget for the year, which will help you conclude the year on a high note.

Learn More>> Strategic Financial Planning: A Guide to Planning Your Future

3. Analyse Your Spending

The biggest factor in the achievement of your financial goals is where your money goes. You either have to spend less money or make more money to progress. Spending less is always the easier option and doesn’t have to come in the way of making more money.

It’s time to determine whether your spending is aiding or sabotaging your financial goals. 

Review your bank and M-PESA statements, shopping receipts, etc. to identify areas where you are wasting money, your most important expenditure items, and what you frequently spend on. 

Make a record of every penny you spend, and then classify your expenses according to category. 

You are then able to make a deliberate decision about how you want to spend your money going forward.

Look for possibilities to free up cash flow, such as more flexible internet options, reducing the amount you pay for a television subscription, and taking at least one vacation home rather than going away each year.

Remember that your "disposable income," also known as your "spending money," refers to the money available to you after you have contributed to the funding of your long-term financial goals. Examples of these goals include saving for a deposit for a house and retirement funds.

If you are continuously unable to save what you need to protect your future, you could be living above your means. However, it indicates that you may need to take more radical actions, such as moving to a home that costs less to maintain, to rectify the situation.

Read Also: How to Budget and Save a Lot of Money As an Employee

4. Review Your Savings Plan

Are you still up-to-date with your savings goals, or did you leave it off along the way? If your current saving plan is not achieving the desired results, you have to adjust it accordingly to ensure that you save what you need to by the end of the year.

The following strategies can help you save more consistently:

  1. Pay yourself first by ensuring you set aside your savings before spending a single shilling from your monthly paycheque.
  2. Automate your savings - do not leave savings to chance, you may be forgetful. Let the specific amount you want to save be deducted immediately money lands in your account every month. 
  3. Join a savings challenge - this can be a brilliant way of staying motivated to never miss a contribution to your savings account
  4. Open goal savings accounts - these are accounts purposely set up with a specific goal in mind e.g. a vacation savings account. They help keep the goal in perspective and you can easily monitor their growth against the target as opposed to bundling all savings in one account. 
  5. Save incrementally  - If you are new to saving, start small e.g. 5% of your paycheck, then each month, increase that amount by 10% until you reach the desired percentage of income you’d want to be saving. 

Read Also: What are the 3 Methods of Saving?

5. Review Your Emergency Fund 

Have you found that you needed to make any withdrawals from your emergency fund during the first half of this year? Have you used any money toward purchasing a new phone, paying an outstanding bill, or any other kind of expenditure? These unanticipated costs can leave you in a difficult financial situation if you do not have reserves.

Setting aside finances for unexpected events means having enough money to cover three to six months' worth of your monthly living expenditures. But that depends entirely on your preferences and habits in life.

If you need to bolster your reserves, you should seek strategies to get more money in your hands. You can accomplish this goal in one of two ways: reduce your expenses or increase your income. For example, pick up a second job on the side to increase your monthly cash flow. You might also negotiate a raise with your employer or customers.

You don't have to worry if you don't have an emergency fund or haven't saved enough. Once you choose an attainable goal, begin contributing monthly toward that goal while still funding your retirement.

Useful advice is to keep your emergency fund in a location distinct from your primary bank account if possible. That way, you'll have less chance of succumbing to the temptation to use it for something unplanned. In addition, you can determine at a glance just how much you have in your possession.

Learn More: Easy Steps to Create an Emergency Fund in 100 Days

6. How Well Is Your Retirement Fund?

Make sure you evaluate your progress toward retirement savings and ensure that you are still on track if you are to retire at the desired date and net worth. 

If you have recently received a promotion or salary raise, you may consider increasing the amount you contribute to your retirement accounts, if possible. This is the ideal option to accelerate your retirement goals. 

Finance experts suggest you increase your retirement savings by at least 1% annually to help you attain your goals.

You can also allocate your bonuses towards boosting this fund or lowering your expenses as you divert the extra cash towards boosting your retirement savings.

Read Also: 7 Reasons Why Retirement Planning is Important

7. Assess Your Debt Situation 

How much debt have you incurred over the first half of the year? Once you know the exact amount you need to settle, it's best to devise a payment strategy to ensure that you'll be debt-free by the end of the year.

There are different debt repayment strategies you can adopt. For example, you can use the avalanche method, which involves prioritising the debts with high interest. The other option could be the snowball alternative, where you pay off your small debts in their entirety.

It's best to incorporate these debts into your monthly budget to ensure that you are consistent with clearing the amount you owe different entities. However, the amount you set aside monthly will depend on the debt settling modality that you select.

Learn More>> The 7 Types of Personal Budgets and How to Choose

8. Know Your Credit Score

A person's creditworthiness, sometimes known as their capacity to repay debt, can be evaluated based on their credit score.

A good credit score is the single most significant factor in determining whether or not you will get loan approvals, whether it be a personal loan or a loan for your business, and whether or not the interest rate will be favourable. If you are in good financial shape, any financial institution will be more than eager to assist you in whatever way it can.

The Central Bank of Kenya has approved three companies through which you can know your CRB standing and credit score; Transunion, Metropol, and CreditInfo. You can also dial *433# and follow the prompts.

If you have a credit score between 700 to 900, then your score is high enough for various financial privileges. On the other hand, a score between 0-450 is low, and you need to do all you can to boost it. The best way of rectifying your score is by ensuring that you pay your loans on time. 

You can get a comprehensive credit report from any of the three agencies at some extra cost, giving you a clear outlook on the specific areas requiring adjustments.

Top Tip: You are entitled to a free credit report every year from CRBs. Take a pause now and claim that credit report. 

9. Inspect Your Investments

Have you invested in the stock market, bonds, fixed deposits, real estate, or bitcoin? It's time to review their performance. Are they bringing in the expected yields or accruing as anticipated? 

Here are the specific aspects to evaluate:

  1. Assess the investment's performance and whether it is likely to resonate with your goals
  2. Review your funds as their positions can change over time. Only ensure that they are performing well under the prevailing circumstances.
  3. Evaluate your asset allocation to ensure your risk appetite balances your investment strategy.
  4. Review your future goals to affirm that they align well with your portfolio.

Read Also: How To Turn Your Savings Into Investments

10. Update Your Insurance Needs and Estate Plan

Your life insurance policy should have a sufficient assured amount to sustain your beneficiaries in case of death. If you just got married or had a baby, you might have to review your policy accordingly.

The same applies to your health insurance. Apart from including all your beneficiaries, you can opt to purchase a better package, especially if your income increases.

Do you have a property, and is its insurance up-to-date? Perhaps you renovated it or made expansions on it. You risk being undercovered unless you discuss the changes with your insurance company and adjust your payments accordingly. 

Car insurance needs vary with time. Reviewing your coverage options may help you get the right amount of insurance at an affordable price. You could also be eligible for discounts that may benefit your coverage.

When reviewing and updating your estate plan, you are ensuring that your intentions haven't changed and that you have the right people in your plan. In addition, if there are major life changes, you'll ensure that you incorporate them into your estate. 

Apart from key life events like a promotion, new job, or a change in your goals, reviewing your plan at regular intervals guarantees the transfer of your estate, both financially and otherwise. Your heirs will also receive their benefits as painlessly as possible.

Read Also: Why Estate Planning is Important in Financial Planning

WRAPPING UP

It's not too late to get your financial house in order if you're committed to doing so in 2022. 

Through self-analysis or collaboration with a financial advisor, you could utilise the year's remaining months to create a budget that will allow you to meet your short-term and long-term financial objectives.

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