Almost all professionals look forward to a personal financial checkup once in a year or after some significant events like divorce or marriage.

It is essential for you to follow some kind of routine when it comes to reviewing your finances. Above all, you need to be careful about not leaving anything behind. 

No doubt you visit your doctor every year to ensure that everything is perfect with your physical health, then why not follow the same with your financial health.

Financial CheckupFor example, you are on a road trip; then you are most likely to take some breaks and check if you are going in the right direction. The financial checkup somewhat serves a similar purpose.

Here you can get an opportunity to check if you are on the right path to your goals or do you need to alter some plans.

Experts recommend that you must undergo a financial checkup every year so that you can also implement some tax-saving strategies.

Even if you are busy during the holiday season, then you don’t need to worry you as you can again do it in the New Year also.

Above all, when you think of all health, you can only think about physical health. But that’s not the case always, as health is multi-faceted. 


Step by Step process to evaluate your Financial Checkup

Here is a beginners guide to evaluate your Financial Checkup –

  1. Budgeting
  2. Investments
  3. Debts
  4. Retirement
  5. Financial Goals
  6. Insurance Coverage

These are 6 important steps in your Financial Checkup process. Lets have a detailed understanding of these now.


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    Budgeting – Step 1 in Financial Checkup

    You need to start with the budget because everything is based on it. The budget acts as a foundation of both personal and household finances. Your goals are on autopilot if the budget is working correctly. 

    If you fail to have an account, then it is quite possible that you will find it challenging to accomplish any goal. Hence, you must make a budget if you don’t have one. 

    Thanks to the remarkable technological developments that there are a plethora of budget software apps that help you in staying on budget.

    Even if you don’t want to edit things manually, then you can indeed link the software with your bank account. 

    At least once in a month, you must review your budget so you can ensure that it is working just fine. All you need to is make sure that income and expenses are recorded correctly. 

    The main agenda of the budget is to give you a big picture of your cashflows and show you how much is left post expenses. You need to ensure that your budget gives you an optimistic overview. 

    How you use your surplus will make a world lot of difference to your finance. Just you need to ensure that you move in a direction that will enhance, including investments, savings, etc. 


    Investments – Step 2 in Financial Checkup

    You will surely make your job a lot easier when you set your investments on autopilot. But annually, you do need to review it, so you get an idea about your progress. 

    With time you also need to reassess the risk tolerance. It is mainly important because when you get older, it is quite possible that your risk tolerance will also increase. 

    This generally happens when you are close to retirement, but there are other elements too. You are most likely to prefer less exposure to equity if there is a decline in the market. 

    Additionally, it is never too late to rebalance your portfolio. There are a plethora of managed portfolios available now, including Robo advisors who do everything automatically. 

    You need to make several adjustments if you have multiple investment accounts. Furthermore, you can do this by understanding the more excellent picture. 

    At least once in a year, experts recommend you to rebalance your portfolios on a bigger picture.


    Debts – Step 3 in Financial Checkup

    The main plan here is to get done with the debts. You must chuck away the obligations when you are near your retirement. The only way you can do this is by keeping an eye on the debt regularly. 

    Additionally, you also need to make a summary of debt annually. It is relatively easy to get familiar with debt that you pay the bills every month. Just ignore the big picture here. 

    Above all, at times, it becomes challenging to calculate the amount of debt you have to pay. To know how much you owe precisely, you need to assess the total debt at least once a year. 

    Besides getting the loan account statements, you must also get a credit card report annually. Above all, you need to ensure that you don’t miss any obligations. 

    Also, here you can grab the opportunity to understand your credit report for future mistakes. 

    When you summarize your debt annually, you can quickly evaluate the amount of debt that will go from one year to the next year. Your goal must be to ensure that your level declines every year. 

    If you are failing to meet such goals, then here you have the golden opportunity to implement strategies.

    Besides this, you can also consider looking for opportunities where you have to pay minimum interest on loans.

    The summary most likely gives you a chance to get a review of the interest that you are likely to spend on loans. 

    Above all, you must compare the rates that are available in the market. When you pay a low-interest rate, you can also improve the cash flow, which will eventually help you in repaying the debt quickly. 


    Retirement – Step 4 in Financial Checkup

    Annually, you also need to review your retirement savings so you can ensure if you are on track or no. You need to ensure that you maximize your contribution to the retirement plan. 

    If you aren’t able to do so, then you must have your contribution level. You will add income tax with A Roth plan as the withdrawals from plans are not taxable. 

    Learn about the locations of your retirement accounts, mostly after you have left the job.

    Revamp your midterm and short term goals:

    Besides retirement, it is most likely possible that you have more savings. You need to ensure that your income helps you in reaching your goals. 

    All you need to do is increase some savings as compared to the past few years. Also, you need to consider and update some contingency plans. 

    It can be anything from replacing the roof of your house or saving money for your vacation. You can build your accounts gracefully if you add money to these accounts gradually. 

    Additionally, you also need to avoid any messes to raise the money, or you are going to get into trouble. No doubt you need to save for yourself, but you also need to save for your children’s education. 


    Financial Goals – Step 5 in Financial Check-up

    No doubt, every year you come up with some or other financial goals. If you don’t have any economic purpose, then there is no time perfect then now to do so. 

    Ideally, you can keep goals as your milestones to evaluate some progress further. Dreams can help in improving your finances significantly, but if you understand the basis of plans, you can genuinely achieve them in time. 

    Instead of reviewing your goals every year, you must check them every month. The only way you can make your dreams real in life is through reinforcement. 

    Basically, a goal is a wish just it has an action plan with it. It means you must move forward towards your goals steadily. To ensure what’s happening, you need to review your goals regularly. 

    Take changes happily. You need to know one thing for sure that nothing remains constant in life, so when things change, you also need to change the goals. 

    All you need to do is ensure that your goals are in tune with your current status.


    Insurance Coverage – Step 6 in Financial Checkup

    Many people tend to overlook this part. But we advise you not to do so. 

    When you neglect this element for years at a stretch, then there comes a phase in your life where you are left with dangerous calamities. You can surely avoid such things by reviewing your insurance plan. 

    It can be anything from health, auto to any business insurance policies. Above all, you need to ensure that your current financial status tunes well with insurance policies. 

    Additionally, you also need to make sure that you cover all the essential things. Look for saving where you think you have over-insured. 

    You also need to consider updating your will. Many people tend to forget this after creating a will some years back. 

    The only issue is that your situation will also change with time, so it is not advisable for you to keep the choice static. 

    Hence you must change your will at least once annually. It is because not only your net worth change but there are some changes in your family too.


    Financial Checkup – Conclusion

    There are no second thoughts to it, but a financial checkup is indeed a complex process. But you can make the entire process simple if you review these areas regularly. 

    Irrespective of the method you choose, you need to know that you can’t give up on studying. One of the best ways to reach your goals is through reviewing these elements regularly.


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