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Are Your Finances Healthy? A Mid-year Personal Finance Review

We’ve been told to do a regular medical check-up for the best of health. The same concept should be applied to our financial health as well. In our quest to achieve our financial goals and build wealth, it is important to do a regular check-up of our finances to see whether we are on track.  

Now that half of the year has already come to pass, a personal finance review is a must! It grants you an accurate look into where you are while arming you with the foresight necessary in setting where you want to go.

If you are not sure how to begin, don’t worry, we have got you covered. The following are some of the most important aspects that you should evaluate to make sure that you’re on the right track, where your money is concerned.

Your savings

We all make financial resolutions at the beginning of the year, particularly where our savings are concerned. Ideally, by the mid-year mark, we should have been able to stack up a considerable amount.

In the beginning of the year, you would have set yourself a target to achieve by year end. In your mid-year review, you should ideally achieve 50% of the target. If you have not, then it’s time to re-evaluate your monthly savings.

You would probably need to increase that monthly savings amount to ensure you still hit your annual target by the end of the year. If that is not feasible, then consider reviewing your annual target.

For example, if your annual target is ₱20,000 by the end of the year, your initial savings plan would have been to save ₱1,667 every month. That will bring you to ₱10,000 by mid-year. However, if you find your savings slacking behind at only ₱6,000, you will need to increase your monthly savings from ₱1,667 to ₱2,333 in order to achieve your annual target of ₱20,000.

How much should you save?

Having an emergency fund is the most fundamental personal finance step. Ideally, an emergency fund should equate to three months worth of your monthly salary. However, the amount differs for everyone, depending on how much money you would need should you lose your job tomorrow.  

For example, if your monthly expenses is around ₱20,000, ideally 60,000 should be the amount to buffer your expenses in cases of unforeseen circumstances.

Your investments

One of the biggest mistakes rookie investors make is leaving their investments without regular monitoring. This could potentially lead to bigger losses due to inaction or delayed reaction.

Checking in periodically with how your investments are doing is always a good thing to do. However, come June or July, it becomes even more important. This is because the mid-year investment assessment is a ripe time to evaluate how your original allocation targets are doing, and whether they are moving towards the direction you set for them.

Is your investment moving forward?

Why are you investing? There can be different answers to this question, but the bottomline is to have a return of investment (ROI). In finances, when you invest, your ROI is in a form of a monetary gains may it be in a short period of time or long-term.  

Short-term investments are expected to expire within one to three years, and are expected to be liquidated within that period. Investments of this nature include money market funds, stocks, and treasury bills. Short-term investments can help in shaping your present financial situation.

On the other hand, long-term investments are accounts or assets that you intend to hold for more than five years. They come in a form of stocks, bonds, real estate and cash.

The type of investment you choose should depend on your financial goal. For long-term goals such as your preschooler’s college fund or your retirement fund, it makes sense to consider long-term investments such as real-estate, unit trust funds or bonds.

However, if you are saving for your wedding or buying your first home in the next three to five years, then consider shorter-term investments such as stocks. The most important things to consider for short-term investments are the cost of investments and the liquidity.

Is your portfolio diversified enough?

Assessing your investments should also come hand in hand with evaluating the health of your portfolio. If your results are positive, then you can rest easy; if they are not, a rebalancing may be in order. Remember that your portfolio must be diversified enough to cover all possible bases of fund performance, as some types of investment may do better than others. Additionally, make sure that your investments are in accordance with your specified time horizons.

Your credit

Your credit can play a major role in keeping you within your spending limits. If not used cautiously, you’ll end up incurring unwanted debt. In addition, being behind on your payments will negatively affect your credit score, which can lead to a host of potential complications such as being denied of certain essential financial and lifestyle solutions.

If you’ve been behind your credit card payment, there’s never been a better time than now to settle them. We are all aware that credit card bills can be a real shocker, especially if you have incurred late fees that add up to more than you can afford.

Your mid-year financial review should not just include wealth building, but also debt management. What is your target in reducing your debts? Are you meeting your target? If not, it’s time to increase your debt repayment every month so by the end of the year, your debts would be reduced to the desired amount.

Other financial aspects to review

In addition to the above, we also recommend checking in with your:

  • Flex spending accounts. Reimbursable costs that do not get used may get forfeited, so if you have been funneling some of your money towards healthcare or commuting plans, send in your receipts.
  • Mortgages. Re-assess the value of your home to check if you have better equity now for other financial plans such as refinancing.
  • Insurance coverage. Many life milestones can render your insurance coverage inadequate. For example, setting a family and having children can significantly increase your required insurance coverage. Make it a habit to review your insurance policies to check if the sum assured is still adequate for you and your family.

Preparing for the next six months

After reviewing how your finances are doing, the next thing to do is make sure that they are on track and subsequently ensuring that they stay that way until the end of the year. If they are not, you should look at making the necessary adjustments to get them on the right track again. But regardless of whether you’re happy or not after the review, keeping these tips in mind is important to ensuring you will be happy with your money when December comes along.

Set adjustable and realistic financial goals

Setting down what you want to achieve with your finances is usually slated for the start of the year, but molding them into better shape during the middle of the year is not a bad thing to do, too. Setting down clear set of goals that you can adjust accordingly is even better. Have a clear look at where you are, where you want to go, and how you are going to get there. This is particularly important for those who have found their financial status to be lacking.

To start, map out your goals for the next five years. These do not have to be grand or big; in fact, one financial goal can be as simple as getting a new car. Then write down your expected time of completion, along with the expected costs. Do the same for the next set of five years, and then the next. Getting this process down to pat will help you stay focused on your direction, as well as keep you locked in on the bigger vision.

Ramp up your savings contributions

If you have not yet looked into automatically setting aside a certain amount every month towards your savings, start today. Additionally, check to make sure that your emergency fund has enough to tide you over a potentially difficult time; more importantly, verify that it is still liquid and its interest is performing as it should. If your mid-year review has proven to be unsatisfactory in these regards, remedy it as early as now.

Track your spending

If you have not yet gotten a headstart on this good habit, do it now. Keeping track of your spending allows you to pull relevant data about your financial habits and motivations, and consequently harness them to your advantage. What’s even better is that there are many free resources that you can use to track your spendings, such as DollarBird and Fudget. When choosing which platform or application to use, make sure that it comes with the function to input data manually, as this will help keep your banking accounts secure by limiting the risks of data theft or any other form of your information being compromised by automated systems.

Automate your finances

Many finance success stories swear by the advantage that was offered by the automation of certain financial transactions. Funneling funds from one account to your savings account, for instance, will lower the chances of overspending and neglecting your monthly savings. Additionally, set up bills payment to look after themselves, so you won’t miss a payment and incur higher interest. And, if you can, look into automatic investing to stay on top of market timing.

Work on your portfolio

Make sure that your investment portfolio is designed for optimal profit and growth. For 2017, Bloomberg forecasts that the best investments include stocks in pharmaceutical companies, as well as Asian equities. If you have the cash to spare, consider hiring an investment advisor to help you decide on the best strategy for ensuring maximum liquidity and profitability for your investments. In addition, keep yourself updated about market news and trends that shape the dynamics of financial sectors.

The mid-year mark ushers in the perfect opportunity for sitting down and taking stock of everything that has transpired in our lives over the last six months. Personal goals? Business endeavors? Career growth? These and more are up for necessary assessments so that we can chart our progress, map out a better course for the next six months of the year, and make sure we cap it off happily.


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