It’s the time of year you think about putting a thicker duvet on the bed, dusting off the heater and perhaps getting a ‘flu shot. It’s also a good time for a financial health check.
Many of us consider our financial position at the beginning of the year and resolve to try and pay off debt, save a little more and perhaps invest some money, but six months later we have forgotten our good intentions.
Early in the year, when you’re still enthused and committed, is probably the best time to pencil in a date for a financial review. But, even if you haven’t planned a regular financial assessment, it’s a sensible habit and halfway through the year is as good a time as any.
Here are three things to consider when you do.
Assess your financial goals: When considering your goals, be practical and realistic. If you’ve been a couch potato all your life you wouldn’t start a fitness programme by entering an Ironman. You might begin running, cycling and swimming smaller distances and build up your fitness levels in each discipline. The same applies to your financial health.
Setting too many goals can be as bad as one, huge unrealistic goal. Rather set two or three. This makes it easier to stay focussed and track progress. Reaching attainable targets will give you a sense of achievement and will encourage you to continue improving your financial wellbeing. It’s better than giving up because you’ve tried to do too many things at once or been too ambitious.
Ask yourself if the goals you set at the beginning of the year are still achievable. Be honest. If reaching your savings target will only require a little belt tightening in the second half of the year, then stick to your plan. Similarly if you’re easily going to reach it, perhaps you need to set yourself a stretch target.
Check your credit score: Everybody from banks to retailers, landlords to car dealers decide about your financial dependability based on the three figures that comprise your credit score. Think of it as the printout from an ECG, the machine used to check your heart rate. It provides an indication of how consistent and reliable you are financially.
By law you’re entitled to one free credit report a year from any of the credit bureaus. The problem for many people is that, like the readout from an ECG, unless you’re an expert these can be difficult to understand and usually don’t give you much information on what you can do to improve a poor score.
Fortunately there are alternatives. Online financial tools such as Pulse enable you to get a free credit rating as often as you like. What’s more, it also provides information about how the rating is made up, how you can improve a poor rating and also makes it possible for you to track your progress over time.
Review your budget: It’s something even the finance minister does – he calls it the mid-term budget review. The reason for reviewing your budget is that some of the assumptions you made at the beginning of the year may no longer be true. For example VAT has gone up and the cost of fuel has increased. This may mean you’re spending more than you anticipated and might need to try and cut back further in order to reach your other financial goals.
Think again of the triathlon analogy. Halfway through your training programme, you may have reached your running and cycling targets, but are struggling with the swimming. You can either focus on running and cycling and hope that better times in these will make up for the time you spend in the water, or you can get some expert help to improve your swimming times.
Similarly when your review your budget you may find that you’re on track with paying off debt but aren’t saving as much as you’d intended. You might look to see where else you can save on monthly expenditure to make up the shortfall, or speak to a financial advisor.
Whether you’re planning the equivalent of a financial Ironman or just want to get fit and lose a few kilogrammes, it’s helpful to set some goals and regularly assess your progress. It increases the chances that you’ll stick to your plan and ultimately achieve your goals.