July 22, 2020
Building wealth is a long-term game that requires patience and forward thinking. Of course, those who start saving and investing early tend to have the best results.
Still, there is more to growing wealthy than creating a one-time plan and following through. You have to be willing to endure many ups and downs, pick yourself back up when you face a setback, and continually re-evaluate your plans as life takes it course.
For that reason, it’s smart to create annual goals as well as five-year, ten-year, and even twenty-year financial goals.
6 Steps to Create a Mid-Year Money Goals Review
Breaking things down even further, it can even be advisable to do a mid-year money review every year. As we all know, time has a way of getting away from us. One minute it’s the new year and the next it’s spring, summer, then fall.
By reviewing your money goals in the middle of the year, you can see where you’re at and get back on track if life has gotten in the way of your financial plans. Here are six steps you can take now that can get you going in the right direction:
#1: Start tracking your credit score.
While your credit score isn’t necessarily an indicator of wealth, having good credit can help you save money and become wealthier over time. Good or excellent credit can help you qualify for home loans and car loans with low rates and terms, for example. Solid credit can also make a difference if you want to borrow money to start a business.
The best way to find out how your credit score looks is to get a free credit score online and check it at least once per month. Ideally, you’ll want “very good” credit or better, which is typically any FICO score over 740. If you’re not there yet, you’ll want to keep paying your bills on time and pay down debt to lower your utilization. If you have great credit already, just stay the course.
#2: Discover (and track) your net worth.
One real measure of your growing wealth is your net worth. This figure is determined by taking all your assets and subtracting your liabilities. Ideally, you’ll want your net worth to grow over time as you reduce debts and grow wealth via home equity and investing.
While you could manually track your net worth by figuring out what you own and subtracting what you owe,Personal Capital can help you track your net worth easily and for free. By checking on your net worth now and every few months, you can watch it inch up as time goes by.
#3: Take a holistic look at your spending.
Overspending is a big problem for Americans, and we have the credit card bills to prove it. If you want to build wealth and achieve other financial goals, it’s best to nip spending problems in the bud.
Since you can’t fix what you don’t understand, the middle of the year is the ideal time to look at your spending and see if it’s reasonable. Break out all your financial statements including credit card bills, then tally up your spending in categories like food, entertainment, and debt repayment.
If you find you’re spending more than you want in certain categories to the detriment of other financial goals, it may be wise to get on a monthly budget for the rest of the year. There are plenty of budgeting strategies to try including zero-sum budgeting, envelope budgeting, and the 50/30/20 method. See which type of budget works for you, then give it a real shot.
#4: Create a plan to pay down debt.
If you’re not reaching your financial goals or saving as much as you should, debt could be standing in your way. By paying down the debts you owe, you could free up cash you can save and invest.
There are many strategies to consider when it comes to paying down debt, but many people prefer the debt snowball or debt avalanche methods. Where the debt snowball asks you to focus your attention on the smallest balances first and pay the minimum payments on your other debts, the debt avalanche asks you to focus on higher interest rate balances first. Neither way is right or wrong, and they can both be beneficial if you can use them to get out of debt and stay out.
Since it’s the middle of the year, it’s smart to figure out how much you can pay off by the end of the year. Consider creating a monthly debt repayment goal and make sure you work that amount into your new budget or spending plan if you have one.
#5: Consider boosting your retirement contributions.
Saving for retirement isn’t that hard if you have a work-sponsored plan like a 401(k). You can set up a monthly percentage to contribute then leave it alone. That’s easy, right?
Unfortunately, you may not be on track to saving enough if your contribution is too small or you aren’t receiving your full employer match. The best thing you can do is play around with a retirement calculator to see if your current savings rate is enough. If not, consider boosting your savings percentage right away.
Typically, you can do this via your company’s Human Resources department. If you’re self-employed and have a SEP IRA or a Solo 401(k), on the other hand, you’ll have to create a plan to save a higher percentage of your income on your own. Either way, the best time to boost your savings for the future is now. Your future self will thank you if you do.
#6: Create savings accounts for all your money goals.
Last but not least, mid-year is the perfect time to start saving for all your other goals, whether that includes college tuition for your kids, a home remodeling project, or an annual vacation.
While you can save for several different goals in one place, it might help to open a new high-interest savings account for each item. From there, you can set aside a certain figure for saving for each in your monthly budget or spending plan. It’s easy to say you want to take a vacation or build new deck on the back of the house, but having a savings account earmarked for travel can help you get there a lot faster.
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