Half-yearly financial report: is it time to draw up a new plan?

Reviewing how you’ve managed your money over the past six months can do wonders for staying on track with your goals. Here are some tips for an effective financial statement.

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Q: When my girlfriend and I received our tax refunds, we put them into savings as one of our goals this year was to find the money to take our first post-COVID trip. However, another of our goals was to pay off our credit cards, so we could start saving for our wedding. Needless to say, with the high cost of living, we haven’t made a huge dent in our credit card balances. It’s super frustrating because we’re now halfway through the year and no better than when we started. What can we do? ~Todd

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A: If the first six months of 2022 are any indication of what’s to come, our finances could be in a wild ride. Many of those who have made New Year’s resolutions have probably revised them several times or abandoned them altogether. However, in the words of William Arthur Ward, “The pessimist complains of the wind; the optimist expects him to change; the realist adjusts the sails.

July is the perfect time to do a mid-year financial review and adjust any sails that need adjusting. This is an opportunity to review where you are in relation to your goals and make a plan for the next six months. A revised plan is better than no plan, so with that in mind, here are some tips to get you started:

What is a mid-year financial review or report?

A mid-year financial review is a time to check in on yourself and how you are doing with your finances. You might want to compare your current ranking to where you were six or 12 months ago, or where you are compared to your goals.

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A financial review will vary a bit from person to person depending on someone’s situation. However, a health check should always include a thorough review of all your income, expenses and bills, your savings and investments, and your budget. It may also include a review of related financial matters, such as pension plans, insurance policies and taxes.

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Is there anything to focus on?

With the impact of inflation on our post-pandemic finances, it’s important to focus on everything that matters to our goals. If it is important to control your expenses, analyze in depth all your expenses. Track where you spend your money and if you live within your means. If you’re using credit to supplement your paychecks, that won’t be a viable strategy as interest rates rise. Make informed choices and changes once you know your spending habits.

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7 tips to combat the high cost of living

If reducing your debt load is important to you, take a close look at your debt management strategies. Ask yourself: are your balances increasing or decreasing? Do you prioritize paying off your most expensive debt or the account with the highest balance? Are you using your line of credit as a lifeline and needing a consolidation loan instead? Take steps to align your actions with your goals.

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During the pandemic, many Canadians realized the importance of an emergency savings fund. If you’ve identified the need, think about what you do to save money for a rainy day. If you’re already saving for unexpected bills and expenses, think about how to reach your goals faster. Through your online banking system, set up automatic payday transfers and consider adding at least a portion of any unexpected windfalls you receive as well. Hiding money out of sight and out of mind will help keep it safe from yourself.

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What not to forget

If you have variable rate credit products, be sure to check with your lender to see where you stand and what to expect. Home equity lines of credit (HELOC) are often based on interest-only payments, but all line of credit payments are affected by rate changes. With the expectation of a significant increase in interest rates in mid-July, it would be wise to budget accordingly now. The same can be said for a variable rate mortgage. If your payments were deliberately reduced, they could also increase.

What happens to variable rate mortgages and HELOC payments when rates go up?

When it comes to a fixed rate mortgage, keep an eye on your due date. This is when your payments could increase. If you need to renew your mortgage in the next 12 to 18 months, work out a strategy with your lender about when a renewal would be most beneficial to you.

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Also keep an eye out for missing money. If you have extended health benefits at work, submit your receipts and get the reimbursements you are entitled to. The same can be said of your taxes. If you haven’t filed a claim yet and probably need to get a refund, do so as soon as possible. If you keep purchases that you wanted to return to a store or send back, be careful of that as well. Don’t leave money on the table if your employer offers an RRSP-equivalent benefit. Review your budget to see how much you can contribute to your child’s RESP to get the most out of the government grant.

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July vs January – why now?

If you’re being honest with yourself, looking at your finances right after winter and the holiday season can be miserable. The days can be long and dark, punctuated by last-minute offers for sunny destinations and emails telling us that our minimum credit card payments are due. The slower pace of July compared to January tends to be a good time to review how we manage our money and where we stand. Our income taxes are filed. We have six months to plan how we will afford to pay for the happiest – and often most expensive – time of the year. And if your budget is maxed out, July is the perfect time to suggest alternative holiday gifts for friends and family.

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The Basics of an Effective Mid-Year Balance Sheet

A mid-year financial review is often presented as a review of your investments. While tracking your savings and investments should be part of a financial review, given the magnitude of the changing cost of living, it’s also important to check other aspects of your finances. How you spend your discretionary funds, allocate your budget, and manage all your bills, expenses, and debts – get help if creating a new plan seems like a daunting task. A non-profit credit counselor in your area would be happy to help.

Related Reading:

What does it mean to build an emergency budget?

5 money-saving tips to survive an economic downturn

How to be financially ready for anything

Scott Hannah is president of the Credit Counseling Society, a non-profit organization. For more information on managing your money or debt, contact Scott by E-mailCheck nomoredebts.org or call 1-888-527-8999.

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