It’s important to submit your health to a medical check up often to find out how you’re doing. Your financial life is no different. This is how you can make course corrections that ensure that you’re remaining on the path to success.
Your fiscal health effects your total sense of well-being, including self-confidence and happiness more than anything else. Several times a year, it’s important to evaluate where you stand financially and where you’re going from there.
Follow these simple tips to perform a personal financial checkup:
1. Identify your starting point
Where are you at right now financially? If you don’t have a budget, now is the time to create one. List your monthly income and monthly expenses as well. Every time you spend any money, write it down or enter it into Excel. Being aware of your spending habits is simple and knowing the amount of money you have available will push you toward making more sound financial decisions.
∙ If you already have a budget, this is a good time to double check that all of your expenses are listed in the budget and funded accurately. An updated budget is your roadmap for the journey into the next few months.
∙ The more clearly you can understand your current financial status, the more motivated you will be to make the changes you need to reach your loftiest goals.
2. Identify where you want to go from here
If you already have established financial goals, reevaluate them. Do they make sense for where you are at financially? Think about what’s most important to you and match your budget and goals to it.
3. Review your insurance coverage
As the circumstances of your life change (a new house, new car, new baby) the amount of protection you need may also change. Look over your homeowners, health, and life insurance to be sure your coverage meets your needs for the coming year. Consider disability insurance, especially if you provide the majority of the income that your household survives on.
4. Create or strengthen an emergency fund
The backbone of a comforting financial plan an emergency fund that can pay for unexpected expenses. If your car breaks down or the air conditioner breaks in the middle of summer, your emergency fund makes sure your budget stays intact.
∙ Most American families would struggle to come up with $500 for an unexpected expense and fall behind financially as a result. The peace of mind that comes from knowing your emergency fund has you covered no matter what is priceless.
5. Establish or update your will
Death is an uncomfortable subject for everybody, but it’s important to leave your affairs in order were the worst to happen.
6. Evaluate your investment portfolio
How is your portfolio performing? Are you investing in the right vehicles (stocks, bonds, mutual funds, ETFs, real estate, gold) to match your goals for retirement income? If you are unfamiliar with this area, you may want to seek the advice of a financial advisor.
7. Adjust your tax withholding
A lot of people provide the federal government with a 12-month interest-free loan every year. Your goal at the end of the tax year should be to end break even with Uncle Sam. Instead of receiving a large refund, adjust your deductions and earn interest on the difference in a savings account.
8. Think about upcoming life changes
Do you anticipate any major life changes in the coming year? Is your car getting old? Do you have upcoming medical or dental needs? Also think about unusual expenses that could occur out of the blue.
Once you’ve reviewed these areas of your family’s financial plan, repeat this checkup once or twice a year and you’ll be well on your way. Awareness, determination to succeed, and the ability to dream big are the keys to financial success.