Financial Health at Midyear: What Needs Fixing?

Conduct the midyear analysis to understand your financial path

With the arrival of June and July, the fiscal calendar has progressed enough to allow for a robust analysis of individual or family financial health.

The so-called Midyear Financial Health Review is a practice recommended by financial planners, portfolio managers, and economic educators.

The goal is clear: identify budget imbalances, review goals, and make tactical adjustments before the fourth quarter.

See the step-by-step guide to performing a good analysis right now!

Budget Diagnosis: The Reality of the Numbers

The first step in any financial checkup is to compare the initial plan with the actual data from the first semester.

A healthy budget should demonstrate coherence between income, expenses, savings, and investments.

Indicators to review

• Monthly savings rate: The percentage of income actually saved so far.
• Debt-to-income ratio: fundamental for properly analyzing borrowing potential.
• Free Cash Flow: Amount remaining after all mandatory expenses.
• Emergency reserve: How many months of fixed expenses are covered? The ideal is 3 to 6 months.

If the savings rate is below 10%, or if more than 40% of income is committed to debt, a warning sign is triggered.

Spending by Category: Where Is the Leak?

Using personal finance software like Mint, YNAB (You Need A Budget), Monarch Money, or customized spreadsheets allows granular analysis of spending by category.

This helps identify areas with excessive consumption, such as dining out, subscription services, or seasonal leisure and travel expenses.

With accumulated inflation in recent years in the United States, fine-tuning consumption becomes necessary to maintain purchasing power and financial balance.

Debt: Refinance, Pay Off, or Freeze?

The variable interest rate environment, especially with monetary policy decisions from the Federal Reserve, directly affects personal loans, mortgages, and credit cards.

Recommended strategies

• Evaluate debt consolidation, especially with rate reductions;
• Accelerate repayment of expensive debts, especially with APR above 18%;
• Avoid revolving debt during periods of financial instability.

The credit utilization ratio (the ratio of the balance used to the available credit limit) should be kept below 30% to avoid a negative impact on the credit score.

Investment Review: Allocation and Performance

Even conservative investors should perform a semiannual portfolio review. Geopolitical changes, Fed decisions, labor market volatility, and economic cycles directly influence financial assets.

Important assessments

• Portfolio rebalancing to ensure it still reflects the risk profile;
• Performance analysis vs. benchmarks;
• Verify if currency exposure aligns with the current economic scenario;
• Check asset diversification to ensure it matches your profile.

If you have a 401(k), IRA, or brokerage account, take advantage of midyear to also review contributions and use of corporate matching, if available.

Financial Goals: Progress and Adjustments

Resolutions made at the beginning of the year often don’t withstand the reality of the first semester. Goals like buying a home, paying off student loans, or traveling require adaptable planning.

It is recommended to classify goals as

• Achieved
• In progress
• Abandoned or postponed

More important than maintaining original goals is having the flexibility to restructure the plan as the context changes. This shows financial maturity.

Taxes: Proactive Adjustment Strategies

If you overpaid or underpaid taxes at the start of the year, it’s essential to adjust withholding to avoid surprises next April.

Also, consider contributing to tax-advantaged accounts like HSAs or FSAs. Review deductions and credits available, especially if you had major family, employment, or residency changes.

Insurance and Financial Protections

Financial health is not only about numbers but also prevention. Midyear is an excellent time to review insurance policies, dental plans, and disability coverage and update beneficiaries.

With rising medical costs in the U.S., adjusting health plans to a more economical model (such as HDHP with HSA) may generate savings and tax benefits.

Long-Term Planning: Retirement and Estate

Midyear review also allows thinking about the long-term horizon. Evaluate retirement projections, update estate planning, and calculate net worth.

If necessary, schedule a meeting with a Certified Financial Planner (CFP) for a holistic and personalized view.

Performing a midyear financial checkup is more than good practice: it is a preventive measure that can avoid future losses.

Small adjustments now—whether in asset allocation, spending control, or debt renegotiation—can generate a great impact by year-end.

Written by

Gabriel Gonçalves