Midway through the year is an ideal point to evaluate your financial situation. Much like a medical checkup, a financial checkup helps you assess your current condition and make any necessary adjustments to stay on track for long-term financial well-being.
While a six-month review might seem overly proactive, the truth is, financial changes often occur gradually and sometimes without obvious warning signs. You might feel like things are running smoothly, only to realize that you have been slowly drifting from your trajectory and financial resolutions. A mid-year checkup offers a valuable opportunity to realign before small issues become significant setbacks.
Checking Vitals and Establishing Your Baseline
Do you have your finger on the pulse, or are you letting money leave your pocket without a second thought?
Understanding your current financial state is the key to beginning a thorough financial checkup and it all starts with measuring your vitals. Here is what to review, why it matters, and how to take action:
- Financial Baseline: Begin by identifying your baseline or the current state of your finances by taking note of your income, expenses, assets and liabilities.They are your reference point when considering what adjustments may need to be made and measuring progress over time.
- Cash flow: As the foundation of your financial well-being, cash flow reflects the relationship between your income and expenses. A healthy cash flow means maintaining awareness of what is earned, what is spent, and whether that relationship supports your broader financial goals.
- Debt: Is your current repayment plan still working for you? List outstanding debts, interest rates, and minimum payments. You may benefit from redirecting funds to high-interest balances or exploring consolidations.
- Savings and Liquidity: Confirm that your emergency fund is adequately funded (typically three to six months of essential expenses) and that your ongoing savings habits are contributing to both short and long-term goals.
Screening For Risk and Protecting What Matters
Not only is it important to stay on track, but it is also crucial that we consider some of the factors that could knock us and our journeys out of alignment. After all, wealth is one of the most deserved and hard-earned assets we have, and protecting your income and future stability should be an integral part of your financial checkup.
Insurance coverage is a critical component of financial protection. Regularly reviewing your life, disability, health, and property insurance ensures that your coverage aligns with your current lifestyle, responsibilities, and financial goals.
It may also be wise to ensure that your coverage limits are significant to meet your current needs – not just those you had when the policy was first set up. Comparing your current policies with available alternatives can also guarantee you’re receiving both the value and the protection you need.
As you conduct your risk assessment, take time to review your estate planning as well. Ensuring that your efforts today continue to benefit future generations begins with preparation. Updating your powers of attorney, will, and beneficiary designations can help secure your legacy and provide clarity for your loved ones.
Evaluating Progress
You put in the hard work of making an income, but is your investment portfolio working hard for you? Undertaking a portfolio review is key to revealing whether or not your assets are continuing to work effectively to your advantage.
Keep these key aspects of portfolio management in mind and ask yourself the following:
- Asset Allocation and Diversification: Are your investments spread effectively across different asset classes to manage risk and optimize returns? If not, rebalance.
- Performance vs. Benchmark: How does your portfolio’s performance compare with relevant market benchmarks? Understanding patterns will help you make informed decisions.
- Risk Tolerance and Time Horizon: Have your circumstances or risk tolerance changed? How can you adjust accordingly to better suit your investment strategy? Revisit your risk profile and ensure your portfolio suits your lifestyle and plans.
- Tax Efficiency: Are your investments structured in a way that minimizes tax impact and maximizes growth? Small tax-efficient shifts can have a meaningful impact on long-term performance.
As markets shift and your life evolves, portfolio reviews ensure your financial strategy adapts with you, so your goals don’t drift quietly off course.
Finding The Leaks: Prescribing Improvements
Sometimes it is not the big, noticeable payments or unexpected debt that is the most detrimental to one’s financial goals, but the small inefficiencies that may be quietly holding you back. Whether it’s missed tax planning opportunities, poorly structured accounts, unnecessary fees or unattainable goals, these subtle leaks can compound over time.
Revisiting your account setup by maintaining the right balance between TFSA, RRSP, and non-registered investments like stocks, bonds, and mutual funds can make a meaningful difference. Similarly, automating your savings, reducing discretionary spending or increasing your retirement contributions are all simple, effective ways to improve financial flow and direction.
Plan Next Steps and Stay Accountable
Just like any form of preventive care, financial checkups only work when they happen regularly. A one-time review may offer you insight, but lasting progress requires consistency and follow-through.
Gain momentum by scheduling these mid-point check-ins throughout the year and set a standing annual review with a professional to revisit your big-picture goals. Most importantly, take note of your insights and turn them into action. After all, a plan without execution is just a good idea left unrealized.
If you are ready to take a more strategic look at your financial path, our portfolio managers are here to help you assess where you are, clarify where you’re headed and ensure every step forward is strategic, intentional and informed by your specific financial goals.
Make this check-in an effective one with a RaeLipskie portfolio manager today: https://raelipskie.com/contact/