Assessing Financial Wellness at Midyear: What Requires Attention?

Evaluate Your Financial Status Midyear

As June and July roll in, it’s the perfect time to take a thorough look at your personal or family finances.

The Midyear Financial Health Review is a valuable practice endorsed by financial advisors, investment managers, and educators.

The aim is straightforward: spot budget gaps, reassess your goals, and implement strategic changes ahead of the final quarter.

Check out the detailed guide for conducting an effective financial analysis right now!

Budget Review: Analyzing the Numbers

Start your financial checkup by contrasting your initial budget with the actual results from the first half of the year.

A sound budget reflects harmony among income, expenses, savings, and investments.

Key Indicators to Monitor

• Monthly savings rate: Income saved so far.
• Debt-to-income ratio: Key for assessing borrowing capacity.
• Free Cash Flow: What’s left after essential expenses.
• Emergency fund: Months of expenses covered? Aim for 3-6 months.

If your savings rate falls below 10%, or over 40% of your income goes to debt, it’s a red flag.

Spending Categories: Where’s the Leak?

Utilizing personal finance tools such as Mint, YNAB (You Need A Budget), Monarch Money, or personalized spreadsheets can help analyze your spending in detail.

This process highlights areas of overspending, like dining out, subscriptions, or seasonal travel expenses.

Given the inflation trends in recent years in the U.S., adjusting spending habits is crucial to sustain purchasing power and financial stability.

Debt: Refinance, Pay Off, or Freeze?

The variable interest rate landscape, particularly influenced by the Federal Reserve’s monetary policies, has a direct impact on personal loans, mortgages, and credit card rates.

Suggested approaches

• Consider consolidating debts for better rates;
• Pay down high-interest debts promptly;
• Steer clear of revolving debt during uncertain times.

Maintain the credit utilization ratio (the proportion of credit used compared to the total credit limit) below 30% to protect your credit score.

Investment Check: Allocation and Outcomes

Even those who are conservative with their investments should conduct a portfolio review every six months. Changes in geopolitics, Fed actions, labor market shifts, and economic cycles can heavily influence asset values.

Key evaluations

• Rebalance the portfolio to match your risk preferences;
• Assess performance against benchmarks;
• Ensure currency exposure aligns with economic conditions;
• Verify asset diversification fits your profile.

If you possess a 401(k), IRA, or brokerage account, take this midyear chance to assess your contributions and utilize any available corporate matching benefits.

Financial Objectives: Tracking and Adjustments

New year resolutions often falter in the early months. Aspirations like purchasing a home, settling student loans, or going on trips require flexible planning.

It’s advisable to classify your goals as follows

• Completed
• Ongoing
• Postponed or dropped

What matters more than sticking to original goals is the ability to adapt plans as circumstances evolve. This is a sign of financial maturity.

Tax Strategies for Proactive Adjustments

If you’ve either overpaid or underpaid your taxes this year, it’s crucial to adjust your withholding to prevent any surprises come next April.

Consider making contributions to tax-friendly accounts like HSAs or FSAs. It’s also a good time to reassess available deductions and credits, particularly after significant changes in family, job, or residence.

Insurance and Financial Safeguards

Financial wellbeing is about more than just numbers; it’s about prevention. Midyear is a perfect moment to review your insurance policies, dental coverage, and disability plans, as well as update your beneficiaries.

Given the rising medical expenses in the U.S., switching to a more budget-friendly health plan (like an HDHP with HSA) could lead to savings and tax advantages.

Long-Term Vision: Retirement and Estate Planning

Taking time for a midyear review also helps you think about your long-term goals. Assess your retirement forecasts, refresh your estate plan, and calculate your net worth.

If needed, book an appointment with a Certified Financial Planner (CFP) to get a comprehensive and tailored perspective on your finances.

Conducting a midyear financial checkup isn’t just a good habit; it’s a proactive strategy to help prevent future setbacks.

Making small tweaks now—whether in investment distribution, managing expenses, or renegotiating debts—can lead to significant outcomes by the end of the year.

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