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July is often thought of as a time for home improvement projects, well-deserved vacations, and leisurely day trips. In addition to these activities, financial pros say that being midway through the year, July is the perfect time to evaluate your financial situation to better prepare for the rest of the year.
FOX Business asked financial experts about why it’s important to take the time to check in on your finances and how to put a plan into action to achieve your short-term and long-term goals. Here’s how to get started:
Why is now the perfect time for a mid-year money check?
While you should always keep on top of your spending, savings, budget, investments, and overall financial plan on a regular basis, it’s also important to take a closer look at the bigger picture.
“With spring coming to an end and tax season behind us, it’s time to reflect on the past six months and adjust your plans to reach your year-end goals,” says Nicole Cope, senior director at Ally Invest. “Taking the time now to evaluate your financial situation will give you enough time if you need to re-adjust your debt paydown or savings strategy come the end of the year.”
While you should always keep on top of your spending, savings, budget, investments, and overall financial plan on a regular basis, it’s also important to take a closer look at the bigger picture. (iStock/iStock)
What expenses do you need to review mid-year?
Review of bank fees
As you review your finances, take a closer look at bank fees that can add up over time. Here are some fees that could be costing you:
Monthly service fee: Cope said account holders can usually avoid the monthly fee by opening both a checking and savings account with the same bank or by setting up automatic monthly deposits.
Overdraft/Non-sufficient funds fees: To prevent this fee, Cope suggests signing up for overdraft protection or low balance alerts so you can replenish your account balance before it falls too low.
“Some accounts may waive overdraft fees under certain circumstances, so be sure to ask your bank,” she says.
ATM fees: To avoid these fees, use your bank’s website to find in-network ATMs.
So when assessing whether a bank is right for you, take a moment to think about how you spend and save.
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“Compare minimum opening deposits, balance requirements, monthly fees, interest rates and customer service reviews to determine if they fit your spending habits and help you keep banking fees low,” Cope says. “Your banking partner should be willing to help you achieve your financial goals and assist you along the way.”If after your research you find that your current financial institution isn’t meeting your needs, it may be time to move on to another institution.
Look Around IInsurance Coverage: Mid-year may be the time to take a closer look at your insurance needs, how much you’ll pay, and whether you can qualify for bundled discounts.
When assessing whether a bank is right for you, take a moment to reflect on how you spend and save. (iStock/iStock)
“Premiums aren’t necessarily negotiable, but you’re also not contractually obligated to stay with your current insurer,” Cope says. “Just like when you open a new bank account, shop around for rates and compare your current statement to the premiums, including the combination of options, premiums, and benefits.”
Evaluate your savings strategy: The middle of the year is also an opportunity to set savings goals, and experts say having a plan in place can make these goals more achievable. Even setting aside small amounts is important.
“There’s no one-size-fits-all strategy when it comes to savings, and your savings strategy may be different to someone else’s, but any amount you can consistently save will add up,” Cope says.
Keep in mind that when it comes to saving, time is on your side, so whether you’re looking to overhaul your current approach mid-year or start fresh, consider the following:
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Set a monthly savings goal. Get into the habit of saving regularly and frequently.
Let’s start small: Cope said saving pennies or automatically putting aside small amounts can help more than you might think.
“Many people have success with a ‘pay yourself first’ strategy, where they save a little bit from each paycheck,” she says, “and if you can slowly increase the amount you save, even better.”
Build your emergency savings: No matter how carefully you plan, unexpected bills, hospital trips, unexpected home or car repairs, and other emergency expenses can add up to expenses.
No matter how carefully you plan, unexpected bills, hospital trips, unexpected home or car repairs, and other emergency expenses can add up to expenses. (iStock/iStock)
“A general rule of thumb when saving for an emergency fund is to set aside three to six months of your regular expenses,” Cope says. If you have money from a side hustle, a bonus from work, or even just some unused cash, you can use that money to build an emergency fund to cover unexpected expenses, Cope says.
review Credit card debt: Credit card usage is likely to increase in the second half of the year, so a July review is one way to plan accordingly.
“For many consumers, the end of the year marks an increase in spending due to holidays and annual sales,” said Emily Irwin, director of the advice center at Wells Fargo.
She suggested using spreadsheets and other organizational methods to keep track of your spending and creating a plan to pay off debts that have already built up on your balance sheet.
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“Remember, not all debt is bad (e.g. mortgages, student loans, car loans). While debt can serve credit-building purposes, accumulating credit card debt with high interest rates can put a strain on your finances,” Irwin said.
In this regard, there are two ways to pay off your debt. First, from a purely financial perspective, the best option is the “avalanche” repayment strategy, explained by Irwin, where you pay off the loan with the highest interest rate first, and then continue making payments on that loan (minimum payment + additional payments) until the loan is paid off in full.
The second method is a “snowball” reward strategy, which works best for people who need quick results.
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“With this strategy, you pay off the loan with the smallest balance first, and then keep paying that loan (minimum payment plus any extra) until it’s paid off,” Irwin said. The main benefit, he said, is that paying off a debt gives you a sense of satisfaction, which motivates you to keep working on other debts.
Why you shouldn’t wait until the end of the year
Putting your finances on the back burner can have negative repercussions.
“If you wait until the end of the year to review your finances, you’re likely to feel overwhelmed and give up,” Cope says. “A midyear review is a more insightful opportunity to not only evaluate your current financial situation, but also identify your goals for the future.”
