Every year begins with the best of intentions, but habits are hard to break, particularly when it comes to money. So, whether you’re out on your own, living with a partner or married for years, it’s a good idea to check in with your finances periodically. Halfway through the year is an ideal time to take a deeper dive to be sure everything is on track. If you’ve wavered, there’s time to get back on course before the busy fall and holiday season take over.
All too often, as people look at their finances, they start with expenses as the first step. But spending is only part of the story. A full midyear financial checkup reviews spending, savings and income. Combining all three reveals a more complete financial picture — one that ultimately helps people make smarter choices about their money.
[See: 10 Summer Savings Tips.]
Spending. “Don’t spend what you don’t have” remains the ultimate truth in managing day-to-day finances. Of course, monthly spending includes both fixed and discretionary expenses — in other words, your needs and wants. While some fixed expenses, such as a plush apartment, may be breaking the bank, it’s often discretionary spending that takes its toll.
So, consider shifting your mindset around the way you spend to be more mindful of not only where your money is going, but what you’re getting for it. First, check out a budgeting app to begin tracking expenses. If it makes sense to rein in your spending a bit, try prioritizing expenses through the lens of happiness. Think of it like Marie Kondo’s advice in “The Life-Changing Magic of Tidying Up” as a test for your wallet. Many people find that it’s dramatically easier to steer clear of overspending when considering the emotional benefit of purchases, comparing needs and wants and how they may affect short-term and long-term financial goals.
[See: 8 Big Budgeting Blunders — and How to Fix Them.]
Savings (and investments). All too often, savings are considered to be whatever is left over after bills and expenses are paid. But honestly, a more deliberate approach to savings can encourage people. With a solid savings plan — one that meets big goals and small goals– it really doesn’t matter if people choose to spend the rest on avocado toast. Knowledge is power, so having a heart-to-heart now about savings goals makes it easier to build new habits and make trade-offs. Watching savings grow is energizing while budgeting can seem like a drag, so why not stick with the positive?
The good news is that it’s now easier than ever to begin building a nest egg. New savings and investment apps, such as Digit or Acorns, may help you get over the hump and build new habits by starting in small increments and putting savings on autopilot.
And for those people who have turned to the market to invest their savings and make their money work a bit harder, midyear is also a great time to check in and make any changes to optimize investment returns.
[See: Your Month-to-Month Guide to Savings.]
Income. At the end of the day, after taking a comprehensive look at savings and expenses, a complete financial checkup includes some soul-searching on income.
While it seems basic, confirming whether the money coming is enough to cover what’s going out remains important. All too often, people are living close to the edge. Skimping on savings goals for even a few months can make a big dent that is often difficult to overcome.
Be aware of you where you stand financially — and whether or not you expect to fall short. Considering a side hustle or even a garage sale may go a long way.
The goal of any midyear financial checkup is to help people build awareness about their finances in a way that provides a combination of more choices and greater happiness in the future. All the money in the bank can’t buy happiness, and all the flexibility in the world often isn’t sustainable without money. Striking the right balance may look different, depending on your current priorities and financial outlook for the future.
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Midyear Financial Checkup: Look Beyond Your Budget originally appeared on usnews.com
