Why a Mid-year Budget Check-up Is Important

A mid-year budget check up is an essential part of any financial plan. Granted, the year 2020 has been strange. There’s no denying it. COVID-19 has rocked the economy and many of our worlds. But, now that the spread has slowed and life is slowly settling into a new normal, it’s time to tally up the damage and check your budget, goals, progress, and needs.

For decades now, my husband and I have lived on a written budget, carefully crafting written short, medium, and long-term goals. Although we have always met at the dining room table to discuss the budget, the first of July has always been our greatly anticipated, big, financial powwow.

For this meeting, I prepare a special snack, brew a pot of coffee, bring extra markers and pens, and allow twice our normally allotted time.

Why?

That’s a great question. If we are tracking expenses and meeting regularly, why is the month of July magical?

The answer is simple.

A half a year has passed.

Yep! That’s really the answer.

What if I looked at the utility bills only for the months January, February, and March? If I thought of that that figure as the “norm”, I would freak out! In fact, the only time energy bills are higher is in August. If I averaged our food bills during the same time period, you would think we were feeding twenty people. Our weekly CSA boxes begin around the first of May, allowing us to drop our monthly grocery expenses more easily.

That’s my point.

You must periodically look at your budget and goals over a longer period of time to really know where you are in your journey of meeting financial goals. You can’t just look at one or two months.

Simply put, you need six months of expenses to begin to see an overall pattern. These numbers will give you a more consistent, truer look at your financial position. The trajectory toward meeting your yearly written goals will be clear after 180 days of the year have passed. You can see an accurate picture of where your money has gone and where it needs to go for the rest of the year.

A mid-year budget check-up will:

• greatly reduce your anxiety
• allow you to set or adjust your budget categories and yearly goals
• improve your communication as a couple
• remind you to be thankful for your blessings and God’s provision

Getting Ready for the Budget Check-up

There is always one CFO in a marriage. I am the chief financial officer in ours. That doesn’t mean that my husband doesn’t have a voice. It means that I am the number cruncher. I prepare the documents for our meeting. I suggest areas that we need to look at closely. However, in the decision-making process, we are equal partners.

Larry and I go over the specifics of our actual mid-year budget check up and give you in-depth tips in this video. (Click on the video below to watch it.)

What do you do at a mid-year budget check up?

There are four main areas which we focus on during this meeting:

• Our progress
• Our budget
• Our sinking funds
• Our feelings

I’ll explore each in-depth below.

#1: Check Your Progress on Goals

If you have saved a beginning emergency fund of $2000, then it’s time to turn your attention to paying off debt. Pick 4 or 5 debt repayment goals to focus on during the calendar year. If you are debt-free, like us, then these goals will be related to saving for the near future.

You should always have a written list of short, medium, and long-term goals. Those which you plan to complete within 18-24 months count as short-term. These are the goals which, most likely, will get attention during your mid-year budget check up.

Do these goals still seem reachable? Do you need to lower the goal or maybe put more money each month toward specific goals? Are there any new goals that need to be added?

Larry and I had four goals on our 2020 budget:

• $4000 – Larry’s teeth – For details on this whopper unexpected expense (and learn the 5-step formula we follow for all unexpected expenses) watch this video from our YouTube channel.
• $8000 – New HVAC system – We’ll need to save an additional $4000 next year to replace it probably in 2022.
• $1000 – New Computer – Mine is aging. We want to be ready just in case it stops working.
• $6800 – Additional ROTH contributions – Our goal is to max out both of our ROTH accounts every year. This figure represents the difference between the amount regularly deducted from out checking account each month and the total amount with which we can fund them yearly.

I know by looking at our mid-year progress, that we have met one of our four goals. I also know about how much additional income we can expect in the next six months. Based on my insights, we will alter the budget or change the goals as a couple.

This is also a great time to look a little longer term. There are some items which you thought could wait for a few additional months or years, which now are closer on the horizon than you had ever imagined.

#2: Check Your Budget

How is the overall budget working? Are there areas which seem out of whack?

This is your opportunity to delve deeply into your budget categories. Go ahead! Crunch some numbers. Divide the total amount you have spent in areas like food, gas, and household items by six. That’s the average you have spent each month this year.

Are you happy with that number? Do you need to make some adjustments for the last half of the year? If so, now is the time to discuss those changes (and the effect they will have on your other budget categories).

Did any specific categories like car insurance, property taxes, or fees unexpectedly increase? You may need to throw more money at those needs. If you want to get any area under control in a hurry, begin using a cash envelope system. Believe me, it works!

Be aware that anytime you add, subtract, or in any way alter your list of goals or your monthly budget categories, the entire budget will need to be readjusted to take those changes into account.

#3: Check Your Sinking Funds

Sinking funds are budgetary needs for which you save a specific amount each month. Then, when the total amount is saved, you spend it, tracking each expense from that sinking fund, to insure you don’t spend more than you have available.

You can really make any budget category into a sinking fund. However, some budget categories lend themselves better to this approach.

Here are examples from our budget:

• Vacations
• Clothing
• Gifts
• Christmas
• School Supplies
• Home Furnishings
• Car Upkeep
• Home Maintenance

When Larry and I have our six month budget check up, any category which is giving me pause for concern or appears to be underfunded is highlighted in yellow. The last column on my budget review sheet is always reserved for comment or questions that we need to discuss.

#4 – Check Your Feelings

This is the final, yet still significant part of the six-month budget check up. How are you feeling about your progress? Are you stressed about meeting savings goals or paying down debt?

Your mindset is half the battle when it comes to meeting financial goals. You need to believe that you can do it! When you grab great big goals, the only confession coming from your mouth should be that of victory.

However, I’m not going to lie to you.

• Setbacks happen.
• Frustrations occur.
• Hearts weary in well-doing.

So, what do you do when your mid-year budget review reveals discouraging news or the road to success seems awfully long?

• You get into agreement with your partner and revamp the budget.
• You change the plan of attack.
• You reduce or eliminate budget categories as needed.
• You rearrange and reprioritize goals.
• You get together in prayer and seek God for direction and a solution.

But, you don’t give up!

If you need help, check out our Personal Finance Planner. I walk you step-by-step through creating a budget, setting goals, paying off debt, and organizing it all in one convenient notebook.