Step-by-Step Checklist for Evaluating Your Financial Wellness
Any time of the year is a great opportunity to give your finances a check-up. Think of it as an annual financial review—it’s your chance to take a close look at where you stand, set new goals, and plan for what’s ahead. In this article, we’ve put together a simple, practical financial health check-up guide with an annual financial review checklist to help you cover all the important aspects of your financial life. It’s an easy way to stay on top of your financial game!
Start Where You Are: Assess Your Current Finances in Four Steps
Our financial health check-up guide begins with helping you to know where you stand right now. Use these four steps to evaluate your current financial position:
Step 1. Get to Know Your Monthly Budget and Spending Habits:
- Analyze Expenditures: Start by examining your spending over the past year. Categorize expenses to identify areas where you may be overspending.
- Adjust Your Budget: Based on your spending analysis, adjust your budget to better align with your financial goals.
Step 2. Evaluate All Your Income Streams:
- Assess Stability and Growth: Review your primary and secondary sources of income. Consider the stability of your income streams and opportunities for growth.
Step 3. Assess Your Savings:
- Emergency Fund Status: Ensure you have an adequate emergency fund, typically recommended to cover 3-6 months of living expenses.
- Savings Goals: Evaluate your progress towards short-term and long-term savings goals.
Step 4. Get to Know Your Investment Portfolio:
- Portfolio Performance: Review the performance of your investments, comparing them against relevant benchmarks.
- Asset Allocation and Diversification: Ensure your investment portfolio is well-diversified and aligns with your risk tolerance and investment horizon.
Once you’ve completed these first four steps in your financial health check-up guide, you can move on to the next three steps, which assist you in reviewing your debt and credit standing.
Debt Management and Credit Review in Three Steps
This next section of considerations in your annual financial review checklist relates to debt and credit. These steps are critical to a comprehensive financial health check-up:
Step 5. Analyze Outstanding Debts:
- Debt Reduction Plan: Summarize your current debts, including mortgages, loans, and credit card balances. Evaluate your progress in reducing these debts.
- Interest Rates and Refinancing Options: Review interest rates on your debts to identify refinancing opportunities that could lower your costs.
Step 6. Get Your Credit Score and Report:
- Annual Credit Report: Obtain a free copy of your credit report from the major credit bureaus to check for accuracy and signs of identity theft. You can also get a free copy here once per year.
- Credit Score Evaluation: Understand your credit score and the factors influencing it. Identify steps to improve your credit health.
Solidifying Insurance and Estate Planning in Two Steps
Now let’s dig into another important aspect of this financial health check-up guide. These steps will help you review your insurance and estate plans as part of your annual financial review checklist:
Step 7. Insurance Coverage Review:
- Adequacy of Coverage: Review your life, health, auto, and homeowner’s/renter’s insurance policies to make certain they provide adequate coverage.
- Cost-Benefit Analysis: Consider the cost of premiums versus the benefits provided. Shop around for better rates if necessary.
Step 8. Estate Planning Update:
- Will and Trusts: Make sure your will and any trusts are up to date, reflecting your current wishes and financial situation.
- Beneficiary Designations: Review and update beneficiary designations on all retirement accounts, insurance policies, and other assets to be sure they align with your estate plans.
Setting Goals for the Future in Two Steps
Setting goals for the future may not seem like an important aspect of a financial health check-up guide, but keep in mind that you can’t clarify a path forward if you don’t know where you’re going. Use these steps to get started:
Step 9. Financial Goals Setting:
- Short-term and Long-term Goals: Define clear, measurable financial goals for the year ahead. These may include saving for a major purchase, paying down debt, or investing for retirement.
- Strategy Development: Develop a strategy for achieving your goals, including specific steps and timelines.
Step 10. Retirement Planning:
- Retirement Savings Review: Assess your current retirement savings. Are you on track to meet your retirement goals?
- Contribution Adjustments: Consider increasing your retirement savings contributions if your financial situation allows.
Education and Healthcare Planning in Two Steps
Here are a few additional steps to add to your annual financial review checklist as you make your way through this financial health check-up guide:
Step 11. Education Savings:
- Education Funds: If applicable, review the status of education savings accounts such as 529 plans. Evaluate if your current savings pace aligns with future education cost projections.
Step 12. Healthcare Planning:
- Health Savings Account (HSA)/Flexible Spending Account (FSA): Review your contributions to HSA or FSA accounts, ensuring you’re maximizing benefits while minimizing out-of-pocket healthcare costs.
Finalizing Your Financial Health Check-Up in Three Steps
When you have successfully addressed the above steps, it’s time to finalize your financial review:
Step 13. Document Organization:
- Important Documents Safekeeping: Make syre all important financial documents are organized and stored securely. Consider digital backups for critical documents.
Step 14. Professional Consultation:
- Financial Advisor Meeting: Consider scheduling a meeting with a financial advisor to review your financial plan. A professional can offer insights and advice tailored to your specific situation.
Step 15. Reflect on Financial Habits:
- Habit Assessment: Reflect on your financial habits in the past 12 months. Identify any patterns that have hindered your financial progress and commit yourself to making positive changes as you move forward.
Are You Using a Financial Health Check-Up Guide?
An annual financial review is key to maintaining and improving your financial well-being. Using a financial health check-up guide can help you assess your current financial situation, identify areas for improvement, and set actionable goals for the future. Gaining clarity through this process not only supports your long-term financial wellness but also helps you to remain consistent in applying your financial strategies in the future.
At B.A. Schrock Financial Group, we know that some of the above steps can prove daunting. If you’d like help in using this checklist for a financial health check-up, we can help! Whether you’re planning for retirement, investing for the future, or looking to protect your assets, we’re here to listen, understand, and help you every step of the way. Want to learn more about our services and process? Schedule your 15-minute introduction call with us today!
