Medics often advise annual comprehensive medical check-ups. This process helps to determine your health status, early detection of anomalies, and intervention if required. After a medical check-up and receiving a positive report, you leave confident that your health and fitness are in great shape.
What is a financial checkup?
Much like a medical checkup, this process examines your current financial state and pinpoints areas that require changes or interventions.
Financial experts recommend that you conduct a financial checkup annually or after major life events like marriage, divorce, birth, or death.
What to cover when conducting a financial checkup
Assess any life changes: Start with reviewing any major changes in your life since your last financial checkup. Have you changed jobs, gotten married or divorced, taken on a dependent, received an inheritance, bought a home, taken a loan, or retired? If any of these events have occurred, chances are they will affect your overall financial posture.
Set financial goals: Create a list that includes anything that requires money that you do not already have – whatever is contained in that list are your financial goals. They can include saving for children’s Ivy League education, saving up for a home or car, funding your side hustle, saving for your dream vacation, creating an emergency fund, or saving enough for retirement amongst others.
Check-in regularly on your progress towards achieving any of these goals and adjust as needed. As soon as a goal on that list is achieved, strike it off and work towards the next.
Draw up a budget: This is like a map for handling your income and expenses on a regular basis. When you create this – in a handwritten format, with a computer spreadsheet or budgeting software, monitor and adjust as needed. With a budget, make sure that you have enough income to sort all your usual expenses, with some extra set aside for longer-term financial goals.
Check your debt: Did you take a loan or owe a debt? Review your progress in paying down all your debt. Consider the best timeframe and method to attack your debt-repayment plan, especially if there’s a rising interest rate attached, and stick to that plan to clear out your debt.
Evaluate your retirement savings: If you have retirement savings with your company, make sure that you’re making additional contributions no matter how little to increase your chances of having more saved up for retirement. If you’re self-employed, you will also someday retire so, explore a retirement savings scheme designed just for people like you.
Track your other money goals: Perhaps you have other savings goals like building an emergency fund, growing your mutual fund investments, investing in stocks, and funding a desired lifestyle; consistently review your progress and initiate automatic debits where necessary to ensure accountability with those goals. Also, do your best to stay abreast of changes in the financial market through trusted fund managers to take advantage of a bullish market or seek financial advice during a bear market.
Assess your Estate Plan: No matter how little you consider your assets to be you should have a plan in place for what would happen to them if you were to pass. Have a Will or Trust and make a choice of an executor or trustee – this should be a person or entity that you trust to carry out your wish should you be unavailable to do the same. Attach beneficiaries and allocations to each according to your current wishes – this can be changed or reviewed as required. If necessary, engage the services of estate planning experts to ensure that all the T’s are crossed, and I’s dotted.