July 1 marks the midpoint of the year. We have checked off 6 months for 2014, and we have 6 months left. For many companies this marks the beginning of a new fiscal year. For us, it is an opportunity to sit down and make sure that we are still on the right path. Back in December/January we described our annual Budget Summit and Deliverables,’ and I like to prepare an update at 6 months to see how the year is progressing.
Steps to Follow at the MidYear Money Update
- Make sure I have downloaded all of our expenditures thus far, and updated any receipt logging that we planned to do. Ideally I will have been doing this every 2 weeks, but life is rarely ideal.
- Calculate our net worth. The process for this is to get this information
- Bank account balances
- Investment account balances, including any retirement plans for work and college savings accounts for the kids.
- Mortgage balance
- Student loan balance (include any other debt you may have, such as vehicles or credit card debt)
- A simple math equation tells you what your net worth is.
- I also calculate an approximate value of our home, not using anything scientific, and the approximate value of the cars, using www.kbb.com , Trade-In value.
- Be cautious how you interpret all of these numbers. You can’t really touch most retirement accounts without penalties and taxes, so you shouldn’t act like that money is accessible. Same goes for your home and vehicles – unless you are going to sell everything and be a missionary in Africa, you shouldn’t act like you can spend your house. Cuz you can’t, as long as you live there. And selling it can be expensive, so I’ve found.
- Hopefully your net worth calculation is an encouragement. Hopefully it shows that your hard work and focus is paying off, and you are making progress. Maybe slow. Maybe tortuously slow. But progress. If not, don’t despair, just take this opportunity to figure out what you need to do next.
- Review the past 6 months’ “Payday Cash On Hand” graph. Explanation: every payday I log in to my bank account and chart how much money is in the bank. Because I am an Excel Nerd, I also graph that number, along with the average for the year and the rolling twelve month average. But you don’t have to be a nerd to benefit from this…it’s pretty simple. In general you need to be maintaining or gaining. If you have lost ground, identify the cause. Did you have a big purchase that won’t happen again this year? (New car, trip to Jaimaica, appendectomy, etc) If so, continue to monitor, and remember that you should expect that unexpected things will happen every year. If you don’t have any ‘margin of safety’ then these unexpected things will bankrupt you. But if you have not had any special, ‘one-time’ purchases in the past 6 months, then this is your wake-up call. You will have to make specific, measurable changes to your monthly expenses so that you do not continue to decline. Or, you will need a raise, or a second job, or a new job. Or win a beauty contest and collect 75 dollars. The beauty of the July check in is that you can catch these spending problems while there is still time to make the changes. That is a powerful thing!
- Review monthly bills. These bills include utilities and also things like cell phones, subscriptions, TV, etc. Reevaluate if the item is necessary or not, and if it is, what are ways to cut its cost?
- Budget Big 3 review: Food, Restaurants, Retail. How are you doing on these? If good, celebrate. If not so good, decide whether to make changes to your spending or make changes to your budget.
Keep everything in balance – make sure that you aren’t too materialistic. Don’t be a miser. Don’t be greedy. Money is just a tool that you use for the kingdom, and we are supposed to use it to care for our family, win friends, bless others, and ultimately invest in heavenly treasure. As discussed earlier, money is one of your 5 limited resources. You have to purposefully manage it, or it will ruthlessly manage you. I believe that the January budget review and the July checkup are great ways to manage it well.