Ah, summer. Now that the sun is out and the kids are home from school, it’s prime time to enjoy family vacations and backyard BBQs. However, you’ll also want to review your finances to make sure your bases are covered. In turn, it’ll help you stay on track with your money goals.
Here’s what to review during your mid-year financial check-in:
Make Tweaks According to Life Changes
If you’ve recently experienced a life change that affected your financial situation — got married, had a baby, received an inheritance, or got promoted at work — you’ll want to adjust your spending plan so that it reflects these changes.
Let’s say you just got hitched and and moved in with your significant other. How has that impacted your monthly living expenses? And if you just had a baby, how has the new addition to your family bumped up your monthly costs?
Budget for the Second Half of the Year
Besides tweaking your budget based on any life changes, go through your spending plan to make sure it includes one-off expenses and periods when you’re making more purchases. Common “spendy times” are when the kids are gearing to go back to school and during the holidays.
If you want to get nitty-gritty, consider creating separate budgets. For instance, a holiday budget might include traveling to see family, attire for festive gatherings, hiring a pet sitter, gifts, wrapping paper and holiday cards. Your spending plan is a living, breathing thing. And when life changes you’ll want to make adjustments to your budget accordingly.
Replenish Your Emergency Fund
Did you have to dip in to your emergency fund in the first half of the year? By June of last year, I pulled $800 from my emergency fund for car repairs, $2,500 for a new computer, and $200 for a new phone. These unexpected expenses would’ve thrown me into a lurch had it not been for my reserves.
The general rule of thumb for emergency funds is anywhere from three to six months of expenses. But it really depends on your needs and lifestyle. As a self-employed freelancer, I aim to keep at least six months of basic living expenses in my emergency fund.
If you need to shore up funds for your reserves, look for ways to free up money. You can do this in one of two ways: either by cutting back on your expenses or by earning more. To bring in more cash flow, consider taking on a side hustle. Or ask for more money from your current boss or clients.
A pro tip: Ideally your emergency fund should be housed in a separate place than your main bank account. That way, you’ll be less tempted to tap into it without good reason. Plus, you can figure out how much you exactly have at a single glance.
Check Your Credit
Check your credit health by ordering a credit report. You’re entitled to a free report from each of the three major consumer credit bureaus — Experian, TransUnion and Equifax — during a 12-month period. All you need to do is order one from AnnualCreditReport.com. Note that that’s just for your credit report. To access your credit score from one of the three major credit bureaus, an additional charge might apply.
If you want to just check your score, a handful of credit monitoring agencies offer free credit scores. Plus, some credit card networks and banks also offer free credit scores. Note that some of the scoring models might be slightly different than the ones used by FICO®, but your score should pretty much the same for the most part.
Reassess Your Tax Withholdings
If you find yourself feeling cash-strapped and struggling to cover your bills, the answer to having more cash come in each month might be right under your nose. If you want to receive a smaller refund, which means you’ll have a fatter paycheck, consider claiming more allowances and make sure you aren’t having additional money withheld.
On the flip side, maybe you’re in a place where you would be fine financially with getting less each paycheck, and prefer a larger tax refund to use on whatever you please. If that’s the case, you might want to claim fewer allowances. In turn, you’ll have a greater chunk of money withheld, and a smaller paycheck.
To change your tax withholdings, you’ll need to update your W-4 form and submit it to your employer.
Monitor Your Debt Repayment
How much debt do you currently have? And if you have been making payments on existing debt — credit cards, student loans, personal loans, car loans — is your debt repayment method (i.e., avalanche, snowball, or blizzard) working for you? If it’s not as effective or motivating as you would like, you might want to try a different approach.
If you haven’t done so already, you’ll want to come up with a debt management plan. Another option is to work with a nonprofit credit counseling organization such as Money Management International (MMI).
If you’d like help with your managing your money, reach out to MMI. Our trained and certified counselors can give you tailored advice for your specific situation. We’re here to help.
Jackie Lam is an L.A.-based personal finance writer who is passionate about helping creatives with their finances. Her work has appeared in Forbes, Mental Floss, Business Insider, and GOOD. She blogs at heyfreelancer.com.