It is the middle of the year and conducting a financial review can be a great idea to help you make improvements. Doing so will give you the chance not only to review how you did for the first part of the year. Conducting a review of your finances can also help prepare you for the last half of the year and be able to end it on a high note.
A review will help you move forward and be able to catch mistakes before they ruin your financial year. This process can highlight not only the wonderful things you are doing to reach your goal but it also points out areas of improvement. The good thing about is that you have more than enough time to make the necessary changes.
This is one of the reasons why a financial review in the middle of the year is important. It can help you identify the best financial practices that are helping you and show you things you need to change. This can improve your chances of reaching your goal at the end of the year. When doing a review, here are a few things you can look into and review.
One of the first things you need to include in your financial review is your household budget. You made this budget early in the year and if there have been significant changes in the past months, your budget needs to reflect that. Your income and expenses for the month need to be up to date and able to adjust to the changes in your life.
If you recently took out a loan or used your credit card for a big purchase, you need to plot that out in your budget. You need to be on top of your payments especially the new ones you have added to your budget. If you lose sight of this, you can end up short every month not knowing where your income is going.
As you go over your budget and conduct a financial review, it is important that you have a good overview where you stand with your loan payments. This is particularly useful if you make it a habit of tracking big-ticket items. Here are some of the loan payments you can review at the middle of the year.
Undoubtedly one of the biggest loan payments you could be making in your lifetime. The average mortgage rate has climbed 3.8% since 2000 according to ABC News. This goes to show that a mortgage loan will be an investment of a lifetime. Part of the reason why a lot of people take out mortgage loans is the fact that home ownership still ranks high among the life goals of the American people.
As you conduct a financial review, assess where your mortgage loan is and how you are making your payments. At the very least, you need to be current with your payment when it comes to your house payments. The last thing you need is your bank exercising their lien on the property due to non-payment on the loan.
Make sure you are current on the payments and if your finances will allow, create a cushion on your mortgage loan. You can do this by making extra payments on your loan. Sending two or three months worth of payment can give you a nice payment cushion. If your lender will allow, you can also make direct principal payments. This can lower down your payments since your interest is benchmarked on a lower principal amount.
Credit card payments
When it comes to doing a financial review, you have to include your credit card payments into the mix. If your mortgage loan is the biggest investment you have made, your credit cards might carry the highest interest rate among all your current payments. You do not have to worry about it if you are paying your bill in full every month.
It becomes a dangerous debt payment if you start to miss your due dates or feel comfortable sending only the minimum amount. Your lender might start assessing interest, fees, penalties, and other charges on your account. When this happens, you will see your payments spike in the coming months. Also, your lender might report your late payments which will have a negative effect on your credit score.
A financial review is not complete if you leave out your student loans. If your mortgage loan is the biggest payment you have and your credit card carries the highest interest, your student loans can be the most challenging to pay off. One reason for this is that it sticks with you for a long time. It can also take some time to pay it off with record amounts being taken out every year. The student loan at present is at $1.5 Trillion according to Forbes.
The idea with student loan payments is being consistent and smart about it. Consistency makes sure that you current on your payments. Being smart means identifying ways how you can make the payments easier and, to some extent, lower. You can look at consolidating your student loans to make sure you do not miss a payment. It is also possible to explore automatic payments where some lenders might give reduce your rate in exchange for payment assurance.
As you conduct your financial review, do not overlook the need to go through your financial goals. These goals play a crucial role in how you manage your financial decisions. If your goal is to be able to save for emergencies, then it would follow that you need to funnel extra money towards your emergency fund.
The idea is to make sure that you are on track with your goals. If you are allocating a specific amount of money for retirement, emergency fund, or even downpayment for a house, check if you are on track with your savings amount. If are falling behind, make sure you make the necessary adjustments to get you caught up to your goal.
Your income plays a huge part in your ability to manage your finances better that is why it should be included in your review. The first thing you need to look into is possible changes with your income. Have you been putting in a lot of overtime at work or were you out for a long stretch of time which might have lowered your income for the past few months?
You might have taken on a side gig which increased your income for a span of time. This should also be part of the things you review for your finances in the middle of the year. It might help you pay off high-interest debt or even strengthen your emergency fund. The idea is to be on top of your money situation so you can make the necessary adjustments to make it better as you go along.
A financial review can be a great tool to help you assess your progress and process the areas you can further improve on. Taking this review on at the middle of the year can give you enough data to work on and at the same time, enough time to make the necessary changes to help you end the year right.