Do This Mid-Year Financial Checkup Right Now

New Year’s isn’t the only time to talk about financial resolutions. With summer in full swing, while you’re about halfway between your last year’s resolutions and the next, now is also a powerful time to evaluate your money goals.

To better understand what a mid-year financial checkup should look like, I spoke with Lorna Kapusta, Head of Women and Engagement at Fidelity. Here’s our conversation about why you should reevaluate your money goals right now, and how you can actually achieve those goals.

Why is it important to reevaluate financial goals right now?

It’s always a good idea to reevaluate your financial goals every so often. Your goals and immediate needs will change over time, and that will impact your everyday money decisions. With this past year being full of rising inflation and economic uncertainty, now is a great time to check in on your finances to make sure you’re on track to meet your short- and long-term goals. Whether you are saving for a down payment on a home, paying down student loan debt or are looking to bolster your emergency savings, periodic checkups are an opportunity to reassess your financial needs.

We’re all feeling inflation in our everyday spending, so you’ve got to make sure your money is working as hard as you are! One thing to keep in mind is that many account options provide the opportunity to earn higher interest on our cash—so part of that checkup is to ensure short and mid-term needs are earning the highest interest possible.

How do you conduct a money check-in?

I know how overwhelming it can be to review your finances—we’ve all been there! It’s totally fine to start with small, actionable steps. Here are a few steps to consider.

Take stock of your monthly expenses

First, I would recommend tracking what’s coming in and going out each month. Having an understanding of your post-tax income (what’s coming in) against your monthly expenses (money that’s going out) is the very first step in building up your savings. It will also show you how much you’re spending on essentials like housing costs, groceries, or debt repayments versus nice-to-haves, like eating out or entertainment and where you may be able to cut back in certain categories.

Create a budget

Next, make a budget to help prioritize spending and savings. A good place to start is with the 50/15/5 guideline, where 50 per cent of your after-tax income should go towards essential expenses (e.g., rent, utilities, groceries, etc.), at least 15 per cent of pre-tax income goes towards retirement, and 5 per cent should go towards an emergency savings fund. The other 30 per cent is for discretionary spending like travel and dining out. You can use this budget calculator to see how your savings and spending stack up.

Set specific, attainable goals

Figure out what goals you’re trying to reach, when you want to reach them and how much you want to save. Being as specific as possible with each can help set you up for financial success. For example, if you’re saving for an upcoming trip, set aside a predetermined amount of money each month to reach your goal.

Similarly, aim to be ambitious yet realistic—it’s fine to start small! For instance, instead of setting the goal of saving $100,000 for a future home, which can feel daunting, break this down into attainable monthly payments that you can accomplish over time.

How do you stick to financial goals?

Automate your finances

Consider setting up an automatic deposit to help save money without even having to think about it. Schedule an automatic transfer from your checking to a savings account, including long-term savings or investments like retirement, right after each paycheck hits so you don’t get tempted to spend it. Depending on your financial situation, gradually try to increase this amount each month or quarter.

Pay off high-interest debt

High-interest debt is generally considered any debt with a double-digit annual interest rate (e.g. 10 per cent or greater). As an example, credit cards often have high interest. Paying off expensive debt is an important step in setting yourself up for financial success. And not only do credit cards carry high interest, missed payments can negatively impact your credit score. Before you start saving or investing, work to pay down any debt by making the minimum payments and prioritizing debt with the highest interest first. Once those cards are paid off, you can put what you were spending on payments toward your financial goals!

Choose the right account types for your specific needs

Depending on your goals and timeline, you may want to consider different types of savings accounts. For short-term goals, you’ll want your money to be easily accessible in cash and earning high interest. Something like a money market account or a high-interest cash management account (a cash management account offers all the benefits of a traditional savings but may provide higher interest options) allows you to easily take out money when you need it. For a long-term goal, like retirement, you want to consider a retirement account to earn compound interest over a long period of time—money invested over time, even small amounts, can make a big difference.

How can you keep from getting overwhelmed?

Don’t feel like you need to achieve everything at once, and give yourself some grace if you’re just starting out! Reaching a savings goal most likely won’t happen overnight. Set aside time regularly to check in on your progress and assess any changes that may impact your financial needs. And remember, every little bit counts, so don’t be afraid to start small.