Do You Need a Mid-Year Financial Checkup?

By Nat Sillin

You probably think of the summer months as a season to enjoy the weather, see friends more often or go on vacation.

With all the summer fun, it’s easy to forget about financial house-cleaning. In particular, you might not think about the benefits of doing a financial checkup in late June or early July, at the mid-year mark. But scheduling a few hours to look at the numbers can have a huge benefit for your wallet both in the summer and all year round. 

What is a mid-year financial checkup?

A mid-year financial checkup involves reviewing what you’ve done with your money for the first half of the year, and adjusting your money-management strategy if needed.

To do your check up, you’ll want to review your financial statements to get a sense of how you’ve been doing in the following areas:

• Spending
• Managing debt 
• Saving
• Investing

Looking over the numbers can give you the opportunity to spot irregularities and adjust your budget well in advance of the holidays and tax season. It may also cause you to rethink your summer holiday expenses.

Who needs to do a mid-year financial checkup?

Everyone can benefit from a summer financial checkup. It’s a chance to catch bad habits that have flown under the radar, reset your priorities and improve your money management, even if you’re already on a positive track.

But the practice can be particularly beneficial if you don’t receive a regular paycheck or you’ve recently experienced a big change in your financial life, such as a salary increase, a divorce or the birth of a child. After a big change, you may need to overhaul your budget and try some new strategies for staying out of financial trouble and/or reaching your goals.

Four steps to complete a mid-year financial checkup

Here are some of the steps worth putting on a financial checklist at midyear, so you can ensure your finances are on track for the coming months.

1. Pull your credit reports

Start by requesting and reviewing your three credit reports. You can do this for free at AnnualCreditReport.com, and there’s no negative impact to your scores when you do.

As you review the reports, be sure to look at every detail to make sure the information is correct, including:

• Your contact information
• Debt balances
• Payment history
• Hard inquiries (applications for new credit cards and loans)

The idea is to make sure everything is accurate and to check closely for any irregularities. If you do find anything confusing or incorrect, take a closer look. You may need to file a dispute or meet with an NFCC-certified credit counselor to understand what’s on your reports. 

2. Update your budget

Next, update your budget. If you don’t have a budget, now is the time to create one for the first time!

This part isn’t necessarily hard, but it might feel tedious for some people, since it involves listing out ALL of your monthly income and expenses. To make it easier, use a thorough budgeting template and be sure to look through your last few months of bank statements and credit card statements to pinpoint each category you’re spending money on.

Be sure to capture irregular and one-off costs, too. To incorporate them into your monthly budget, try to estimate the annual cost and divide by 12. Here are some one-offs to include:

• Vehicle registration
• Charitable donations
• Car insurance premiums
• Vacations, including road-trips and flights
• Gifts for birthdays, anniversaries, holidays and more

If anything has changed this year, make sure you update the figures and take a good look at how the change impacts your bottom line each month.

3. Look for ways to improve spending

Once you have your budget written or typed out, review the numbers and ask yourself these questions:

• Is your spending aligned with your goals for the year?
• Are you committing money to goals like paying off debt, saving or investing?
• Do you need to cut spending and/or increase your income to balance your budget?
• What new spending habits have you developed this year?
• What improvements can you make right away?

Then, consider what you can commit to doing in order to reach your financial goals sooner. For example, if you want to pay off credit card debt, you might look for expenses you can temporarily cut, starting with the biggest expenses first in order to make the largest and fastest impact.

You can also look for recurring charges that need to be canceled, like fees for streaming services you don’t use.

4. Review your savings

If you don’t have any high-interest debt (usually credit cards), the next big financial milestone you need to reach is saving for emergencies. This step is crucial since it prevents regular events — like car repairs and unplanned hospital visits — from turning into financial catastrophes.

We advise saving between three and six months worth of your monthly expenses for emergencies. If your income is inconsistent or if you have dependents, aim for the six-month mark. It’s okay if you have to start small, but be sure to keep working your way up from there.

When you do hit the recommended targets, you’ll ensure you can deal with a financial emergency like short-term job loss. That means you won’t have to tap into credit cards or make other high-risk moves just to stay afloat.

To jump-start your savings, reach out to your bank to make sure some portion of each paycheck goes into a savings account, even if it’s just a small amount at first.

How to get help with financial checkups

If a mid-year financial checkup sounds daunting, or if you’re simply not sure how to do it on your own, help is available! An NFCC-certified credit counselor can meet with you by phone, online or in-person to go over everything with you. When you meet with one of our counselors, you can get one-on-one guidance for everything from how to read your credit reports to the best strategies for managing your debt.