We’re in the full swing of Summer, and whether you’re in vacation mode or you’re working just as hard as ever, July is a great time to review your budget. After all, if you created it in January, a lot can change in 7 months, and you want to make adjustments now if you need to. Budgets are fluid documents that are meant to be changed and updated as needed to make sure your money is always working for you.
You don’t need to spend hours and hours pouring over every detail of your budget, but I do suggest taking the five steps listed below to make sure you’re on track to reaching your goals by the end of the year.
Review & update your budget
If you created your budget at the beginning of the year, now is the time to make sure that it’s still working for you. Are you staying within your budget, or are there some categories that need to be adjusted? With the increases we’ve seen in food and gas prices, many of our clients are finding ways to reduce spending in other areas in order to maintain some balance. Also, if your income has changed, don’t forget to update your budget accordingly.
If you haven’t already created a budget, now is the time! It’s never too late to start, and there is no magic date of when one should be created. The sooner you start budgeting the sooner you can take control of your finances and be on your way to reaching financial freedom.
Evaluate retirement savings and contributions
Check and see if you are on track to meet your retirement goals this year. As we all know, balances will fluctuate with market changes so instead of getting discouraged with that, make it your goal to increase your contributions with tax-favored plans. Continually growing your contribution amount is an excellent goal!
The mid-year check-up is also a good time to make sure you are on pace to retire when you want with the net worth that you have set as a goal.
Manage and prioritize debts
Mid-year is a good time to review your debt repayment plan and make any adjustments needed to meet your goals. If you don’t have a strategy already in place, now is the time to put one into action. Which debts do you want to pay off first? How much can you budget towards paying off your debt each month? Has this changed since the last time that you reviewed your budget?
If you’re using the snowball approach then make minimum payments on all your debts and make extra payments on the smallest debt. If you’re using the avalanche approach, you will focus on your debts with the highest interest rate first.
Inspect your credit report
Finding any issues on your credit report early can help you solve them more quickly. Also having a good credit score and knowing what that score is can be advantageous when buying a home or car, renting an apartment, or opening a new credit card.
You can use www.annualcreditreport.com and request a credit report from each of the three credit reporting agencies. As of the posting of this blog, they are continuing to offer free weekly online credit reports. Review each of your credit reports to look for any signs of identity theft or any other errors.
Check the emergency fund
The recent pandemic has definitely shown us the importance of an emergency fund. Do you have at least three-to-six months worth of living expenses in your bank account in case of an emergency? I suggest having even more if you rely on variable income. As we all know, changes in our health and finances can happen quickly, so this safety net is very important as a part of your overall financial planning and budgeting.
Use this time to see if you’re on track to meet your emergency fund goals and whether or not you can possibly add more to it this year.
After you’ve taken the five steps listed above, you will have a clear understanding of where you’re at on the path to reaching your financial goals for the year. Adjust as needed and keep moving forward!
If you need some additional help tracking where your money is going, I developed a system that is streamlined, all-inclusive, and easy to use. The Personal Financial Planner will help you keep track of your money as you progress toward your goals. It also helps ease the anxiety around money and finances because it’s simple and easy to use.
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