Budgeting · March 18, 2021

Why You Should Do an Annual Financial Checkup

In the same way that getting a physical checkup once a year is an integral part of supporting good health, performing an annual financial checkup on your budget and goals will help you keep your finances in tip-top shape. If you've never conducted your own financial wellness exam, here's what you need to know.


The vital signs

Like a visit to your doctor, your financial checkup needs to start with a look at all of your vital signs. These include factors like your:

  • Net worth, which can be determined with a simple net worth calculator
  • Credit score
  • Emergency savings
  • Budget
  • Debts
  • Insurance coverage

These form the foundation of your financial plan. With these items in hand, you can begin to assess your financial health in light of your goals.

The assessment

A financial checkup is about making sure you're meeting your own personal benchmarks. That said, you can feel confident that your money is trending in a healthy direction if:

  • You have a positive net worth
  • Your credit score is improving
  • You know how you'd pay for an emergency expense
  • You make saving a habit
  • Your spending is generally within your budget
  • You're steadily reducing your debts

Setting goals

Just as your annual physical might remind you that you'd like to improve your fitness levels, checking your financial vital signs can help you set goals for your future. Your goals shouldn't be about money—they should be about what you want to do with your money. Do you want to save for a home, that great vacation or live the retirement of your dreams? Make your goals concrete and actionable so you can work toward them and gauge your progress.

The prescription

With your goals in hand, it's time to prescribe the course of action that will help you achieve them. This is where you have to be disciplined, looking for ways to trim your expenses so you can increase your savings. Stick to your budget, pay off high-interest debt and make wise financial purchasing decisions. Giving yourself a prescription for future action will help you get the most from your annual financial checkup.

Checking in on your money is an important part of keeping your finances healthy and your goals within reach. Committing to a regular financial checkup and establishing a strong savings strategy can help you feel confident about your finances and future. And you don't need to go it alone. Just as you seek a prescription from your doctor, a trusted financial advisor can help you develop a plan of action to reach your goals.

Insights

A few financial insights for your life

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