Financial Checkup – 12 Steps to your Financial Health

Financial CheckupIt is a New Year and time to give your finances a personal checkup!

See the list of items below that should be done at the beginning of each year:

1. Set Financial Goals

It may be big items such as saving for a down payment on a home or smaller items like increasing your savings.  It is important to set goals and write these down to make yourself accountable.

2. Check/Update Beneficiaries

  • Retirement Accounts (e.g. 401k, IRA, pension plans, etc.)
  • Life Insurance Policies

3. Check your will

Confirm the current selection of beneficiaries, executor, and guardian/trustee (if you have minor children).

  • Create will, durable power of attorney, durable power of attorney for health care and living will if you don’t have one.
  • Notify someone you trust (executor) of the location of these important documents in case something happens to you.

Consult with an estate attorney if you have questions.

4. Set up an income/expense tracking tool is free, and a relatively easy way to track your spending and savings.

5. Emergency Fund

Make sure you have money set aside in case of an emergency.  This should be at least 3 months of your expenses and be in cash or short term investments with limited risk of loss of principal.

Tip: A home equity line is also a source of cash for an emergency.

6. Company matching contributions

Contribute to your 401(k) plan or similar type of Qualified Plan (e.g. 403b, Simple IRA, etc.), at least up to the amount the company matches.

7. Increase your personal 401(k) contributions

If you have been contributing try increasing the amount by 1%, especially if you received a raise.

8. Roth IRA

Contribute to a Roth IRA if your income is within the IRS limits.  You can still contribute for 2012 until April 15, 2013.

9. Pay down credit cards

Pay down high interest rate credit cards.  The longer you take to pay off the card, the more money it costs you.

10. Order a Free Credit Report

It is good idea to check your credit report for errors once a year and it is free.  Especially if you are considering buying a home in the near future and will need a mortgage.

11.  Check the interest rate on your mortgage

At current rates, anything greater than 4.5% for a 30 year mortgage you could consider refinancing.

12.  Spend less than you make.

It is a simple, but challenging goal for many.  You don’t have to keep up with the Joneses.

Most importantly…

Talk to a financial planner if you are confused or uncertain about any of the items above.  Fee-only firms like Financial Symmetry are focused on your interests first, and do not sell products.


Photo credit: 401(K) 2013

More Like This

Download our 5 Questions to Ask Your Financial Advisor eBook

We break down some of the most important questions we are asked on a regular basis.

  • Hidden
  • This field is for validation purposes and should be left unchanged.

Blog Categories