from money blues to saving success – half year evaluation

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1204146_rainbow_in_hand Way back at the beginning of the year, I asked you to spend some time doing two things: on one piece of paper, write out a list of financial goals, and on another, a list of balances that give a snapshot of your finances at that point in time and provide a yardstick against which you can monitor your progress towards your financial goals.

While it is a good idea to monitor your progress regularly, if you haven’t done so, now is a good time to pull out those two documents and spend a few moments evaluating how you’ve been going so far.

It is easy to get caught up in the day to day business of life and forget about the long term. There are bills to pay, mouths to feed, work to attend, laundry to do, all today, let alone working towards the life that you want to have tomorrow. That is why it is important to take just a few moments to renew your drive, look over your goals and to consider the important but not urgent things that get pushed aside. Take a little time today to renew your commitment to the life that you want to have.

1. Find your January balances

If you didn’t write down any balances in January, you can still do this exercise. Log onto your online banking and make a note of the following balances as of 1 January:

  • your bank balance(s)
  • the balance of your savings account(s)
  • the balance of your credit card(s)
  • the balance of any investments
  • the balance of your mortgage
  • the balance of any other debts
  • the balance of your emergency fund
  • calculate your liquid position
  • calculate your net worth

2. Compare the difference

Next, note down beside each of the January balances, the corresponding balance at 30 June and calculate the difference. Are you better or worse off? By how much? Why? Maybe you have had unexpected emergencies and this has affected your progress. Or is it that you’re spending money on things that aren’t as important to you as the goals you set at the beginning of the year?

To find out by what margin you have improved or not, divide the difference between the January and June balances by the January balance and times by 100. For example, if the balance of your savings account was $5,000 at the beginning of January and is $8,500 at the end of June, the difference your savings has increased by is $3,500. To find the margin, divide $3,500 by $5,000 and times the answer by 100. Your savings in this example have increased by 70%.

What is the overall change to your financial picture? Has your net worth improved? Maybe your savings have gone down, but your debt has also decreased, so your net position is still better.

3. Evaluate your progress towards your goals

Next, look at the financial goals you made at the beginning of the year. Start by evaluating whether the goals you set are still relevant. Maybe you decided to save towards a course you no longer plan to take. Or maybe you thought you would need to save $4,000 towards a holiday and now you think you will need $5,000.

When you have adjusted your goals for relevance, calculate how you’re progressing towards those goals. Will you reach your goal in time? Do you need to make adjustments now in order to reach your goal?

For example, just say your goal was to save $3,000 towards an emergency fund by the end of the year. You calculated back in January that you needed to save $250 per month in order to reach your goal on time. The balance at the end of June is $1,200, a little short of where you need to be at this point in time. In order to reach your goal by the end of the year, you now need to save $300 per month. It’s easier to realise this now and make the necessary adjustments in order to reach your goal (or to get as close as you can) rather than find yourself at the end of the year and realise you’ve fallen well short.

Now, take a few moments to congratulate yourself for your progress so far. Even if you’ve fallen short of expectation, any action is better than no action at all. You’re that much closer to achieving your goals than you were six months ago.

4. Make the necessary adjustments to your action plan

Maybe you have evaluated your progress and found you’ve been doing pretty well. Maybe you have a little work to do in the coming months. Either way, you need to continue to take action in order to realise your financial goals.

Firstly, look at your budget and your spending. How is your cash flow? Are there areas in your budget that you could cut back on? What steps do you need to take to cut spending in these areas? For example, if you want to reduce your takeaway spending, maybe you need ensure there are ready to eat meals in the freezer for nights you don’t feel like cooking. Think creatively about your spending patterns and look for ways that you can make snowflake payments towards your savings goals or debt repayments. For example, exchange a movie night for a video night in or exchange coffee at a cafe for coffee from home, drunk in the park. Then ensure that these extra dollars saved go towards your goals.

Next, make any necessary adjustments to your automatic savings or debt payments scheduled with your bank in order to continue progressing towards your goals. You’re busy. You don’t have time to be working on your finances all the time. Automate them as much as possible so that you stay on track while you get on with living.

At the half yearly mark, take a moment to revise your financial goals and to renew your commitment to them. And take action today. Take the next step towards achieving your goals.

If you’ve arrived at this page via a search engine, your missing out on the complete Step by Step Guide From Money Blues to Savings Success. This article is part of the Frugal and Thriving Newsletter. To read the rest of this newsletter and find out more, you can sign up for the free newsletter here.