Finances are top of mind for many businesses that run a fiscal year from July 1 to June 30. But this can also be a great time for individuals, couples and families to perform their own mid-year household financial checkup.
Did you set goals at the beginning of the year for saving or giving? Did you create a spending plan to guide your purchases each month? If you answered yes, then checking in at the six-month point is an excellent time to see if you are on track or if adjustments might need to be made. Here are two things to consider about your personal finances halfway through the year:
Should you adjustment your spending?
As a certified Housing and Urban Development housing counselor, on average I consult with a different individual every week about purchasing their new home. Many are first time homebuyers. Most of these individuals and couples are very aware of their financial situation. They utilize a banking app or have created their own spreadsheet to track expenses and watch their savings grow. But occasionally, I will talk with someone who is not as confident in knowing where their money goes. They tend to be carrying more debt on credit cards as well.
This is a great time to look at how your numbers line up by comparing your spending, saving and giving to some common breakdowns for personal and family budgets. There are lots of rules out there recommended for budgeting our saving and spending. Most of these are about budgeting take-home pay after taxes have been paid.
50-30-20: This recommends putting 50% towards needs, 30% towards wants and 20% towards savings.
40-30-20-10: This is similar to the previous suggestion, but it does recognize the need to pay down debt. It recommends 40% for necessities, 30% for wants, 20% to savings or paying down debt and 10% to giving.
80-10-10: In this simplistic model, 80% goes towards living expenses (no differentiation of wants versus needs), 10% to saving and 10% to giving.
70-10-10-10: This is similar to the previous method, except it doubles savings. For this recommendation, 70% goes towards living expenses, 10% towards long-term savings, 10% to an emergency fund and 10% to giving.
Ron Blue, Christian financial planner, recommends we budget to live, give, owe and grow. This approach is like some of the others mentioned, but different as it begins with our gross income. It is a helpful way to approach personal finance when we consider that our money is for much more than living expenses.
Long-term savings goals
One question I ask new homebuyers is how they think of their savings. Those who view savings going towards specific goals (both short term and long term) tend to be more consistent in their saving each month. Otherwise, it can be tempting to spend first and then save whatever (if anything) is left after spending.
I’m a huge fan of naming your money. Some people may call that earmarking or designating. It helps, because otherwise the possibilities seem endless with our savings. We can look at $1,000 in the bank and see it available for replacing a broken hot water heater, vacation travel, Christmas gifts or that unexpected car repair. But chances are $1,000 is not going to cover all of that. Naming our money helps us to see that though there may be lots of opportunities for it, we can only make a few choices before that money runs out.
Today, I’ll leave you with this quote from Ron Blue: “The more generous we’ve been, the more generous we tend to become.”
Emily Marrison is an OSU Extension Family & Consumer Sciences Educator and may be reached at 740-622-2265.
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Source Link: https://www.coshoctontribune.com/story/news/local/coshocton-county/2024/07/20/its-time-for-a-mid-year-financial-checkup/74425981007/
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