Do Your Semiannual Financial Due Diligence Now

New Year’s is not the only time to discuss financial decisions . Summer is in full swing and you are about halfway between last year’s and future decisions, now is the perfect time to assess your financial goals.

To get a better idea of ​​what a mid-year financial review should look like, I spoke with Lorna Kapusta , Head of Women and Engagement at Fidelity. Here’s our talk about why you should reevaluate your money goals right now and how you can actually reach those goals.

Why is it important to review financial goals right now?

It is always a good idea to review your financial goals from time to time. Your goals and immediate needs will change over time, and this will affect your daily financial decisions. The past year has been full of rising inflation and economic uncertainty, and now is the time to check your finances to make sure you are on track to reach your short and long term goals. Whether you’re saving for a down payment on a house, paying off student loan debt, or looking to add to your emergency savings, periodic reviews are an opportunity to reassess your financial needs.

We all feel inflation in our day to day spending so you need to make sure your money is working as hard as you! Keep in mind that many account options offer the possibility of earning higher interest on our cash, so part of this review is to make sure that short to medium term requirements are earning the highest possible interest.

How do you register money?

I know how hard it can be to review your finances – we’ve all been in it! It’s perfectly okay to start with small, actionable steps. Here are some steps to consider.

Take stock of your monthly expenses

First, I would recommend keeping track of what comes and goes each month. Understanding your after-tax income (what goes in) versus your monthly expenses (money going out) is the very first step in building your savings. It will also show you how much you spend on essentials like housing, groceries, or paying off debt versus pleasant things like eating out or entertainment, and where you can cut spending in certain categories.

Create a budget

Then create a budget to prioritize spending and savings. The best place to start is with the 50/15/5 principle that 50% of your after-tax income should go to basic expenses (like rent, utilities, groceries, etc.) and at least 15% of your pre-tax income goes to retirement, and 5% should go to a reserve savings fund. The remaining 30% is for discretionary spending such as travel and restaurants. You can use this budget calculator to see how your savings and expenses add up.

Set specific achievable goals

Figure out what goals you’re trying to reach, when you want to reach them, and how much you want to save. Being as specific as possible about each of these will help you achieve financial success. For example, if you’re saving for an upcoming trip, set aside a predetermined amount of money each month to reach your goal.

Similarly, try to be ambitious but realistic – starting small is okay! For example, instead of setting a goal of saving $100,000 for a future home, which can seem daunting, break it down into achievable monthly payments that you can meet over time.

How do you stick to financial goals?

Automate your finances

Consider setting up an automatic deposit to save money without even thinking about it. Schedule an automatic transfer from your checking account to a savings account, including long-term savings or investments such as retirement, immediately after each paycheck so you won’t be tempted to spend it. Depending on your financial situation, gradually try to increase this amount every month or quarter.

Pay off high interest debt

High-interest debt is generally considered to be any debt with a double-digit annual interest rate (for example, 10% or higher). For example, credit cards often have high interest rates. Paying off expensive debt is an important step towards financial success. And not only do credit cards carry high interest rates, missed payments can negatively impact your credit score. Before you start saving or investing, try to pay off any debt by making the minimum payments and prioritizing the debt with the highest interest rate. After these cards are redeemed, you can use what you spent on payments to achieve your financial goals!

Choose the right account types for your specific needs

Depending on your goals and timing, you may want to consider different types of savings accounts . For short-term goals, you want your money to be readily available in cash and earn high interest. Something like a money market account or a high interest rate money management account (a money management account offers all the benefits of traditional savings but may provide higher interest options) allows you to easily withdraw money when you need it. For a long term goal like retirement, you might consider a retirement account like a 401(k) or IRA to earn compound interest over a long period of time – money invested over time, even small amounts, can make a big difference . .

How to keep from overwork?

Don’t feel like you have to achieve everything at once, and treat yourself if you’re just starting out! Achieving the savings goal will most likely not happen overnight. Set aside time regularly to monitor your progress and evaluate any changes that may affect your financial needs. And remember, every little thing counts, so don’t be afraid to start small.