Midyear Check-In: How to Stay on Top of Your Annual Budget

Summer is the season for kicking back and relaxing, but this downtime is also an opportunity for reflection. July 1st is a great day to look at your account statements for the past six months and see how you’re doing against your budget.

While you may have been willing to cut yourself some slack for holiday excesses that spilled over into January, at this point in the year there’s no sugarcoating your monthly spending habits. Your tax return has probably come in by now and any spring housekeeping costs are behind you.

Rather than getting down on yourself if your finances aren’t what you hoped, use the halfway point in the year as an opportunity to do a frank assessment of your spending to date and make realistic plans for the months ahead. This post will highlight a few strategies to help you take a balanced look at how you’re doing and how to move forward.

Be Your Own Business Manager

It may help to think about your personal finances the way you’d think about running a business, even if you’re not a small business owner or any kind of accountant.

Instead of using your wallet as a portal to your personal bank account, imagine the money is being used to support a small store and that you’re responsible for keeping the doors open. With this mindset, it’ll seem natural to check in with your goals throughout the year to track your progress.

When you go to look at your budget, there are two ways to approach how you compare your actual spending to your goals:

  1. Spending pace vs. time passed. Look at your income from an annual perspective. Take the total sum you’ve spent so far and divide that by your total potential take-home income for the year to find out how you’re doing. Have you spent over 50 percent of your total income to date? How much of your income that you were planning to spend this year has already gone out the door? Answer these questions and you can get a high-level view of how you’re doing.
  2. Actual spending vs. monthly budget. Look at your budget month by month. Compare your actual spending on a monthly basis to the amount you’d planned to spend. This will give you a more nuanced view of your spending. Did you have an unexpected health cost in May? Did you spend far less one month than another?

By doing this simple analysis, you’ll find opportunities to dig into the reasons for any discrepancies. Use this chance to be honest with yourself.

Dig in to find out what is causing you to spend more than you’d planned. Were any of these costs preventable? You’ll be able to take these lessons into the rest of the year.

Be a Realistic Optimist

However your midyear check-in is shaping up, there’s good news: it’s only July. You’ve still got time to save up for big bills on the horizon, and there’s no need to panic. Step back and look ahead to the major expenses you know you’ll have in the second half of the year.

  • Do you have kids headed to school this fall? Back to school costs always add up higher than you expect.
  • Are you planning any big trips or vacations? Will you be headed to your in-laws across the country for Thanksgiving? If so, how will you be getting there? Start to think through the cost of travel and accommodations now, and throw in an extra stipend for the turkey.
  • It’s not too early to start thinking about Christmas in July. Or whatever holiday you celebrate in late fall and midwinter! Holiday spending can take a toll on your budget, but planning ahead can help.

These are the costs you can anticipate in advance that you’ll be glad you saved for later. It’s important that you be pragmatic in your approach to your budget. Don’t make excuses for overspending or tell yourself you’ll cut your spending in half next month.

Adopt a healthy belief in your ability to stick to your budget for the second half of the year. Your positive outlook will help you meet your goals and feel good about the things you spend your money on each day.

Be Open to Adjustments

If you’re not meeting your goals, look for small changes you can make to take pressure off your wallet. You can also look forward to opportunities to adjust your basic costs on the annual calendar, like health care premiums.

When open enrollment comes around in November, you’ll likely have an opportunity to update your benefits. Look for additional employer-offered programs to help you on your way to savings that will build wiggle room into your budget.

If your spending is headed off the rails and you’re a renter, can you find a more affordable place to live that meets your needs? If you’re a homeowner, are there places you could cut costs through energy savings? Wherever you live, can you modify your commute to make it less costly?

These may sound like tough questions, but they don’t have to be daunting. Open yourself up to making lifestyle changes if you’re not meeting your financial goals at this point in the year. Look for concrete ways to improve your financial situation.

It’s Never Too Late to Create or Revise Your Budget

Your New Year’s Resolutions may have been unrealistic, and by this point in the year, you have a strong sense what your spending habits are. And if you’re making your first budget, midyear isn’t the worst time to start.

Whether you’re just starting now or you’re looking to reform your budget, we recommend the 50/30/20 model, which was developed with the help of Senator Elizabeth Warren. It’s a great way to get your spending on track.

On this plan, 50 percent of your income after taxes should go to your basic cost of living, 30 percent goes to personal or discretionary expenses, and 20 percent goes to savings.

If 20 percent is more than you can save right now, use this as a benchmark. It’s a great goal to work toward, even if you begin by saving five percent of your income this year, crunch the numbers and see what it would take to save seven percent next year with the same costs and income.

Information is Power: Know Your Spending Habits

Whether you’re just starting out here in July or you’re reviewing your progress on the balance sheet, don’t be afraid to look at your statements and finances. The more you know, the better you’ll be able to handle what comes at you, especially when you’re faced with the unexpected.

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