Financial Literacy Series #8: Time for Your Mid-Year Financial Health Check-In

Financial optimism was high at the start of the year, with 74% of Americans confident about their financial future. Chances are, you set your 2024 financial goals in January, generally the lowest month for consumer spending per household. Were you overly optimistic? Did you spend more on your credit card in December than you budgeted to pay in January?

Even if you did your due diligence by building a budget aligned to your income, life has a way of presenting challenges — job changes, house or car repairs, health emergencies — when we least expect them. While discipline remains crucial in the second half of the year, so does the ability to pivot and adapt your budgeting and saving strategies as circumstances evolve.

The midpoint of the year offers an excellent opportunity to reflect and recalibrate for the months ahead. Follow these five steps to take a thorough look at your finances, progress toward goals and identify areas for improvement:

1. Review your financial goals. Revisit the financial resolutions you set at the beginning of the year and the plan you created to achieve them. Have you achieved most or all of them already? If you have, well done! If not, there’s no shame in that. This is why we take the time mid-year to refocus. Ask yourself: Are these goals still relevant and realistic based on any life changes that have taken place over the last six months? Does anything need to be adjusted or scaled back?
2. Could you evaluate your savings progress? Completion is not the only marker of achievement when it comes to savings goals. Progress is worth recognizing and celebrating. What progress have you made on your savings goals, including emergency funds (remember, the rule of thumb is 3 months of living expenses), retirement savings and any other specific savings plans? Be proud of your progress while you look for areas to improve. Where could you be doing better? Where are you overspending versus your goals?
3. Assess your budget. Have you been sticking to the budget you set for yourself and spending within your means? Maybe the budget you set at the beginning of the year wasn’t realistic; things change. By comparing what you are spending to what you are bringing in, you can identify areas of overspending or categories in which to cut back. Also, are you bringing in the income you expected? Perhaps you’ve been dining out more frequently or buying non-essential items. Identifying these areas allows you to adjust your habits and ensure your spending aligns with your financial goals.
4. Understand your upcoming expenses. The last two quarters of the year can be pretty expensive. Consider any significant expenses likely to occur in the next six months, such as holidays, birthdays, weddings or back-to-school costs. Do you have these in your budget? Additionally, think about annual expenses like insurance premiums or property taxes that might be due soon. Planning for these expenses allows you to set aside funds in advance, avoiding the need to dip into savings or incur debt.
5. Check in on your investments. Investments can fluctuate, and what worked for you six months ago might not be the best strategy now. Review each investment’s performance, considering market conditions and personal financial goals. If certain investments are underperforming, it might be time to reconsider your allocation. Rebalancing your portfolio ensures that you maintain a suitable level of risk and that your investments are aligned with your long-term financial objectives. Consider consulting with a financial advisor if you’re unsure about the best steps.

How to pivot in the second half of the year

After your assessment, you should thoroughly understand how much you are earning and spending, how much you saved in the first six months of the year, and an idea of what you’ll need financially for the upcoming six months. If your current income does not cover your projected spending, there are generally two primary strategies you can employ.

• Increase your revenue. If possible, boosting income is one avenue to cover unexpected or evolving expenses, pay down debt, or save more for future goals. For non-salary workers, taking on overtime hours is one option that can immediately increase their income. Flexible work options such as part-time jobs like freelancing and gig economy services are also becoming more popular. In the last year, 54% of Americans have supplemented their primary source of income with side jobs. A great benefit of these options is the ability to fit them around your existing schedule.
• Reduce your costs. Cutting your expenses can be just as effective, if not more so, than increasing income. When we first evaluate our spending habits, we might easily defend each purchase. However, I challenge you to be critical. You can start by paying all bills on time and avoiding unnecessary late fees, including on credit cards. This is wasted money. Next, identify non-essential spending areas, such as dining out, entertainment and subscriptions. Evaluate whether these expenses can be reduced or even eliminated. Why not split a bottle of wine with friends at home versus going to the bar? Look for ways to save on necessary expenses as well, such as shopping for deals on groceries, negotiating lower rates on bills or finding more affordable alternatives for regular services. Instead of parking at the office, can you carpool or take public transportation? There is almost always room to reduce your spending.

Whatever strategy you choose, the goal remains the same: to secure your financial future. As you pivot in the second half of the year, remember that every dollar saved or earned helps provide long-term stability and peace of mind. Above all else, no matter what adjustments you make, continue to prioritize saving for your future, such as contributing to your 401(k) or other retirement accounts.

Consistency in saving, even in uncertain times, is key to building financial resilience; it’s hard to restart once you stop. So, keep your focus sharp, your goals clear and your commitment to financial health unwavering. Your future self will thank you. 

Good luck making the second half of the year more successful than the first — you can do it!!