It’s July, and the summer heat is upon us! As many will shy away from outdoor activities in favor of cooler indoor pursuits, this mid-year period presents an ideal opportunity to conduct a thorough review of your personal finances. At the start of a new year, many people feel a surge of motivation to get serious about their financial goals, often inspired by New Year’s resolutions. Similarly, tax season can serve as a wake-up call, prompting a closer look at one’s financial situation. However, as the year progresses and various demands vie for our attention, it’s easy for personal budgeting to slip down the priority list.

July, with its scorching temperatures and typically quieter social calendar, is an excellent time to revisit and reassess the budget you set at the beginning of the year. Sitting down with your favorite spreadsheet or financial app, you can evaluate your progress, identify any deviations, and make necessary adjustments to ensure you stay on track for the rest of the year. Embrace this moment to realign your financial goals and set yourself up for a successful second half of the year.

Six Months In

With six months of 2024 in the books, you now have a substantial amount of data to accurately assess your actual spending habits compared to your planned budget. This review can be approached in several effective ways. One method is to take the average spending over the past six months and compare it to the budgeted amounts for the same period. However, spending isn’t the only aspect that requires attention. It’s equally important to review your savings and investment goals. Here, a different approach may be more useful: examining the total amount saved and invested over the first half of the year and comparing it to your anticipated targets. This comprehensive mid-year review allows you to identify any discrepancies, adjust your strategies, and ensure you’re on track to meet your financial goals for the remainder of 2024.

When reviewing these items, it’s important to consider them in context. For example, an unexpected home repair or medical bill might significantly distort a single month’s spending, resulting in an artificially high average. If this is the case and the expense is a one-time emergency item, it may be more useful to exclude it from the evaluation of normal actual spending versus budgeted spending. Similarly, on the savings and investment side, an individual might look at their portfolio and see significant gains despite not saving as much as planned in the first six months of 2024. The S&P 500 gained around 15% in the first half 2024, significantly outpacing its historical average. Continuing such performance is not impossible, however it is unlikely to continue at that level based on historical precedent. Therefore, it is crucial for savers and investors to investigate what factors may have hindered them from achieving their savings goals. By understanding these anomalies and adjusting for them, you can get a clearer picture of your financial health and make more informed decisions moving forward.

All Budgets Can Be Successful

It’s important to note that even if actual spending and saving amounts differ greatly from what the original budget estimated, this doesn’t mean the original budget was a failure or incorrect. Predicting spending for all of 2024 while watching the snow fall in January inevitably involves a fair amount of guesswork. A budget is based on the knowledge an individual has at the time of its creation. While it’s possible to make allowances for “unknowns and emergencies,” even these line items acknowledge that some things simply cannot be predicted. The key is not to view discrepancies as failures but to use them as learning opportunities. The real value lies in the ability to review the budget, explain the variances, and understand why certain items were either accurate or off the mark. This understanding enables you to refine your budgeting process and make better-informed financial decisions in the future.

The Living Budget

Remember, a budget can be a living document, open to adjustment as new information becomes available. Life is dynamic, and since a budget is a reflection of how you “spend your life,” it too will not be static. There are many reasons why you might need to change your budget plans mid-year. For instance, many companies perform evaluations and provide raises during the first quarter of the year. If your budget was built based on your income in January, receiving a raise would be an ideal reason to adjust your budget to reflect the increased earnings. Conversely, if you purchased a new car at a higher than expected price with a higher than expected interest rate, it would be crucial to include this new expense in your budget or revise an existing line item. These adjustments ensure that your budget remains relevant and accurately reflects your current financial situation, allowing you to stay on track with your financial goals.

The Next Step

Budgeting is an iterative process. Regularly reviewing your personal budget can be highly informative, helping you understand how you are spending and saving your money. By examining your personal habits and tendencies, you can gain valuable insights into what works and what doesn’t as you strive toward long-term goals. This is where seeking professional help and advice can be crucial. Expert financial advice can bridge the gap between a personal budget and long-term goals. Financial advisors, with their experience and specialized tools, can project how different budget paths will impact your financial outlook. They can also support your investment strategies, creating a plan to achieve your long-term targets. By leveraging their expertise, you can ensure that your financial plan is robust, adaptable, and aligned with your aspirations.

Your Future is Worth the Investment!