Credit Assess
You started out the year with big promises: pay off debt, only use your credit card for things you can afford, set aside an emergency savings fund.
Now that the year is more than half over, how well have you stuck to your financial goals?
“Too often, people in December and January set resolutions with their debts and we end up seeing people fall off their plans and things go awry,” says Pat White, executive director of Credit Counselling Canada. “A mid-year checkup is a good way to measure how you’re doing.”
“It is easy to slip,” says Laurie Campbell, executive director of Credit Canada. “A lot can happen in six months, and if you don’t have your eye on the ball, debt can creep up and savings diminish without you even realizing it.”
So how do you conduct a mid-year analysis to figure out if you’re on the right track? Here’s what the experts had to say.
1. (Re)calculate your net worth.
In December or January, you ideally conducted a year-end postmortem on your finances. You took stock of your assets: everything in your bank account, your savings, your TFSAs and retirement funds.
Then you recorded all your debts, such as credit card debt, student loans or lines of credit. After subtracting your debts from your assets, you figured out your net worth.
In the summer, you have to do this all over again to see if you’ve progressed on your financial plan.
“This is the easiest measurable way to see how your financial situation has changed in a six-month period,” White says. “It doesn’t say anything specific, but it’s a snapshot.”
2. Assess your debts.
If you’re in the red, you need to zero in on your debts: how much you owe, where the debts are sitting and how much you’re spending on interest.
Campbell suggests some questions to ask yourself when looking at the numbers: “Am I further in debt or in less debt in the last month? Am I getting further into debt every month?”
You may have a repayment plan in place, but find that you’re accumulating further debt by relying on your credit card too much. Or you could have steep interest rates adding to your balance every month.
If this is the case, it may be worthwhile to seek help by calling your creditor or a credit counsellor to gain some interest relief.
3. Determine your financial goal progress.
Consumers are ambitious in the New Year, setting handfuls of goals. But did you leave them at the wayside?
“Ask yourself if you stuck to tracking expenses, paying bills on time and setting aside savings every month,” White says.
You may have vowed to save up for a trip and realize that you haven’t put away a cent, or sworn you’d pay off $5,000 of debt by the end of the year, and discover you haven’t dented it.
Pave the way to making your goals a reality by creating “concrete steps,” White says.
That could mean putting away $833 a month for the next six months to make your $5,000 debt repayment goal, or setting up a direct deposit into a vacation fund. It’s not too late to make progress on your goal, the experts say.
4. See if your budget and savings plans are feasible.
The start of the year may have been your first time adhering to a budget. Did you earmark realistic amounts to cover the categories?
Budgets aren’t meant to be rigid, so it’s OK to return to your spreadsheet to make some tweaks – if your expenses don’t exceed your income and savings goals.
Pull up receipts, credit card statements and debit card statements to fine-tune how much you should be allocating for each category and make feasible cutbacks.
A mid-year revision is a great opportunity to get back into the habit of budgeting.
5. Take note of the red flags.
There are some key warning signs that the first half of your year wasn’t a fruitful one in terms of your financial goals.
Campbell notes these telltale signs you aren’t on track:
- You get further into debt every month.
- You dip into savings to make ends meet.
- You don’t budget.
- You use credit cards for purchases because you don’t have cash.
- You and your partner fight about money.
- You feel you lost control of your finances.
It’s OK if you notice some of these patterns. What’s key is that you’ve caught them.
“The overall goal here with a midpoint or monthly checkup is to ensure that hiccups do not become big problems,” Campbell says.
How to get back on track
First, find out what went wrong. Maybe you had a car repair or you didn’t budget enough for groceries. You could have just lost interest in your goals altogether.
Then, address the problem. That could mean carving out a better budget, rewriting your goals while laying out the framework to reach them, and committing to reviewing your progress again at another checkpoint.
You still have about half the year – that’s a lot of time to turn your finances around.
Tackle high interest debts first while keeping up with your monthly obligations on the rest of the outstanding balances, too.
“Get innovative in your approach,” Campbell says. “Can you ditch your car, rent out a room in your house, get a second job or have a garage sale?”
Finally, budget for the rest of the calendar year. Factor in weddings and other events, back-to-school shopping, Christmas presents and other seasonal and one-off costs.
“You need to look at what’s to come and plan accordingly if you want the rest of the year to be a smooth one,” White says.
