Mid-year finance check: Keeping your budget on track

Budgeting and financial planning are crucial because they provide a clear roadmap for a secure financial future. They help you allocate your income toward essential expenses, savings, and discretionary spending.

Without a budget, it’s easy to overspend and find yourself in financial trouble. Financial planning allows you to set short-term and long-term goals, ensuring you have the resources to meet them and secure your financial wellbeing.

 Nikki Gajoo-Frielinghaus, certified financial planner (CFP) from Opulentus Wealth Management, explains, “Budgeting is important because it helps you keep track of your income and your expenses. It also allows you to identify and correct non-essential expenses, and it prevents you from spending more than you earn. Your financial plan incorporates components such as budgeting and other aspects, including investments and debt management. Joint budgeting and financial planning are vital practices that help you manage and make the most of your finances while preparing for a successful financial future that is stable and prosperous.”

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Benefits of a mid-year finance check

A mid-year finance check is beneficial for several reasons. Firstly, it helps you evaluate whether you are sticking to your budget and financial goals set at the beginning of the year. Secondly, you can identify any financial issues early, such as overspending or under-saving, and address them promptly.

Thirdly, it allows you to adjust your financial goals based on any changes in your circumstances, such as a new job, a raise, or unexpected expenses. Lastly, you can plan for upcoming expenses in the second half of the year, such as school fees, holidays, and Christmas.

Vrinda Dheda, advice analyst from Momentum Velocity Club, says: “A mid-year finance check allows you to assess the progress you have made towards your financial goals, which can include paying off debt, building an emergency fund, or starting an investment. It also allows you to review your spending patterns and adjust elements in your budget, if required. At this point you may identify some bigger expenses coming up such as end-of-year functions and holiday plans. This ensures that you do not end up turning to debt in desperation to fund things that can set you back financially. At this point, life changes like career moves or perhaps planning for another child can also be factored in to ensure that your plan is relevant to your changing needs.”

Key financial areas to focus on

When conducting a mid-year finance review, you should focus on several key areas to ensure you are on track with your budget. Comparing your total income against your total expenses is crucial to ensure you are living within your means.

It is important to ensure you have enough allocated for essential expenses like school fees, groceries, housing, and utilities. Reviewing your progress on savings goals, including emergency funds, retirement savings, and specific savings like a new car or home improvements, is also vital. Checking your debt repayment progress and considering paying off high-interest debts faster if possible can be beneficial. Lastly, evaluating your discretionary spending can help identify areas where you can cut back.

Gary Walker, CFP and founder of Olemera Financial Services, offers some key financial areas to focus on during a mid-year finance review:

• Income vs. expenses:Ensure that your spending aligns with your income.
• Savings goals:Check your progress towards savings for education, emergencies, and long-term goals.
• Debt management:Review outstanding debts and strategize on how to reduce them.
• Upcoming expenses:Plan for future costs such as school fees, holidays, and end-of-year celebrations.

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Tracking spending and identifying cutbacks

Accurately tracking spending and identifying areas to cut back can help maintain financial stability. Vrinda advises: “To accurately track spending and identify areas to cut back, parents can adopt several strategies. Set spending limits using the 65/20/15 rule (65% for needs, 20% for savings or debt repayment, and 15% for wants) and maintain a daily or weekly money journal to categorise expenses into needs and wants. Utilise bank statements and budgeting apps, like 22seven for example, to track spending effectively. Identify areas to cut back, such as unnecessary subscriptions, dining out, and impulse purchases. Implement a waiting period of 24 – 48 hours before buying non-essential items to curb impulsive spending.”

She also says that parents should make finances a family affair by involving children in discussions about managing their allowance and teaching them the value of money: “Encourage kids to earn rewards for household tasks and think creatively about money-making opportunities related to their hobbies. This approach builds healthy spending habits early on and fosters a broader understanding of money management.”

Saving for essential expenses and long-term goals

To balance saving for essential expenses and long-term goals, consider automating your savings by setting up automatic transfers to your savings accounts. This ensures you are consistently saving. Prioritise your expenses by listing them in order of importance and allocate funds accordingly. Maintaining an emergency fund to cover unexpected costs without disrupting your budget is also essential.

Nikki offers these easy-to-follow tips: “Start saving from January and make saving intentional. Get the family involved, including the kids; let them decide whether to go to the movies or save the money towards school fees and holidays. Stick to your budget at all costs, with no exceptions. Prioritise your savings goals by automating them through monthly debit orders. Use separate accounts for different savings goals to stay organised. Consider a side hustle to bring in extra cash. Use unexpected money, such as a tax refund, wisely by topping up your savings or contributing to one of your financial goals.”

Budgeting and financial planning ensure essential needs are met while saving for future goals. Proper planning prevents overspending, reduces stress, and prepares for unexpected expenses, and a mid-year finance check assesses your situation, tracks progress, and adjusts your budget.

Gary concludes: “Reflect on the first half of the year to realign with your goals. Consider your income changes, unexpected expenses, and long-term objectives. Focus on aligning income with expenses, tracking savings goals, managing debt, and planning for future costs. Create separate savings accounts, automate contributions, and establish an emergency fund. For nice-to-haves, set a budget, save early, and find cost-effective alternatives.”

Also read: Best bank accounts for kids