In what seems to be a blink of an eye, we have arrived at the seventh month of 2018. Time flies, isn’t it?
From a perspective of health, we are often advised to do regular medical check-ups. Well, the same prescription applies towards our financial health too. July presents the perfect opportunity to track our finances. This is especially true considering that we Malaysians recently went through the festive Raya season. Everyone knows that had an impact on our wallets, right?
Conducting a financial review allows you to take full stock of how you’ve dealt with your money in the first half of the year. Subsequently, you can “learn the lessons” and make tweaks for the remaining months in the year in a bid to consolidate your finances.
Here are 5 essential questions to ask yourself as part of your mid-year personal finance review.
1. Are you on the right track to meet your financial goals?
During the start of the year, you’ve probably made a financial budget with certain goals to achieve. But a lot could’ve happened or changed in a period of six months. An emergency situation might have occurred which resulted in your savings getting diminished. On the other hand, you may have seen more money coming your way in the form of an appraisal or a promotion.
Whatever be the case (we wish for the latter), it’s high time you analyse your overall position and recalibrate your financial goals. That may involve rebuilding your emergency cash fund or look for ways to diversify your investments to further grow your wealth in a secure way.
After all, adaptability is a valuable skill to possess.
Related: 4 Wise Things to Do with Your Salary
2. What’s the condition of your savings and retirement funds?
There are three major types of savings that you should allocate your money to – for emergencies, for retirement, and for your major personal spendings, such as holidays. The first two are the more important ones. If they have not met your target, you will need to increase your monthly savings.
If your income is tight, you’ll have to consider using a portion of the monthly amount you allocate towards personal spendings and use it for your emergency and retirements funds.
As a general rule, your emergency savings fund should be able to sustain you for three to six months. This is to safeguard your finances if anything unanticipated happens in the future. Read our blog post here for a more detailed guide to build an emergency fund.
Also, saving for your retirement doesn’t mean you have to drastically change your lifestyle. Our blog post here provides 7 intelligent tips on how to achieve that.
3. How are your investments performing?
Although a lot of investments are automated in nature, it is a mistake to leave them without regular monitoring. Periodical checking is a wise habit and mid-year reviews are equally important. This half-way mark is a good time to evaluate how your investment targets are doing and whether they are moving towards the right direction.
Making a financial review will also help you decide if you want to diversify your investment portfolio. We have a few blog posts which you may find handy, such as a beginner’s guide to fixed deposits, an ASB investment FAQ, and why millennials should consider investing in unit trusts and PRS.
However, certain situations will arise which requires your investments to take a back seat. This will be explained in more detail in the next point.
Read also: How Investment-Ready Are You?
4. What’s your debt position?
Following on from our previous point, your investments should take a back seat if you are under considerable debt. It is better that you shift your focus on getting rid of your high-interest debt first.
“The best way to save is by getting rid of debt,” says Greg Hammer, a financial advisor with Hammer Financial. “Is your debt level going up, declining, or unchanged from the start of the year? If it’s on the rise, you need to understand what’s happening with your financial situation and correct your spending pattern,” he adds.
Hammer also describes debt as the worst possible thing to carry in a rising interest environment. Take some time to read our blog post 5 Useful Tips to Become Debt-Free, a detailed guide on how you should go about building your counter-debt strategy.
5. Are you living beyond your means?
If you haven’t realised by now, the main purpose of a mid-year financial review is to examine whether your financial goals have fallen off track. If they indeed have, making adjustments to your spending is your best way to get your budget under control.
“Write down every cent you spend, and then put your spending into categories,” the National Foundation for Credit Counselling (NFCC) suggested in its guidelines on mid-year financial planning. “At this point, you can make conscious decisions regarding how you want to spend moving forward”.
Remember, if you are unable to save what you need to secure your future consistently, it is very likely that you are living beyond your means. Check out our blog post 8 Mobile Apps You Can Use to Make Money on the Side in Malaysia which may help you increase your income.
And if you’ve been looking to apply for a personal loan to fund a major expense (like a home renovation or a vacation) in case your savings are falling short, you’ll be well-advised to check out some of the best PL options in Malaysia right now, and few ongoing PL promotions.
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