How to Conduct a Financial Checkup

Financial checkups are essential for ensuring that you are on track to meet your financial objectives. A financial checkup assists you in assessing your present financial condition and identifying areas for improvement. In this post, we will walk you through the process of completing a financial checkup step by step.

Financial Checkup

Review Your Life Changes

To begin, consider any significant changes in your life since your last financial checkup. Have you recently changed employment, married or divorced, welcomed a new family member, received an inheritance, purchased a home, relocated, or retired?

Each of these life events has the potential to change your overall financial picture. Consider how any recent life changes may effect your future plans as you read through the sections below. The following are some life changes that can impact your finances:

Changes in Your Employment

  • Have you started a new job?
  • Have you received a promotion or raise?
  • Have you experienced a reduction in income?

Changes in Your Marital Status

  • Have you recently married or divorced?
  • Have you become a widow or widower?

Changes in Your Family Status

  • Have you recently had a child?
  • Have your children moved out of the house?

Changes in Your Health

  • Have you experienced a significant health issue?
  • Have you incurred significant medical expenses?

By reviewing your life changes, you can identify how they have impacted your financial situation and make necessary adjustments.

Set or Reset Financial Goals

Creating an adequate retirement fund is one example of a financial objective. Others include setting up an emergency fund, saving for a down payment on a car or house, starting your own business, or anything else that necessitates the use of money you don’t currently have.

Assess your progress toward your financial goals and make necessary adjustments. Once a goal is completed, cross it off the list and replace it with another.

Short-Term Goals

Short-term goals are those that can be achieved within a year. Examples include:

  • Paying off credit card debt
  • Building an emergency fund
  • Saving for a down payment on a house

Mid-Term Goals

Mid-term goals are those that can be achieved within 1 to 5 years. Examples include:

  • Saving for a child’s college education
  • Purchasing a car
  • Renovating your home

Long-Term Goals

Long-term goals are those that take more than 5 years to achieve. Examples include:

Setting or resetting your financial goals helps you prioritize your spending and ensure that your financial resources are aligned with your long-term objectives.

Sketch Out a Budget

Your budget is a plan for managing your recurring income and expenses. A budget should be kept track of and altered as appropriate.

The goal is to ensure that you have enough income to meet all of your regular expenses, plus some more for your long-term financial goals. You can keep track of your budget with pencil and paper, a computer spreadsheet, or one of the many free or low-cost budgeting software tools available.

Assess Your Debt

Examine your progress toward eliminating all debt, including loans and credit cards. If your debt, particularly high-interest credit card debt, is increasing, it may be time to change your spending so that those balances begin to fall again.

The snowball approach and the avalanche method are two common debt-reduction strategies. Compare interest rates on everything from a mortgage to a vehicle loan to credit cards. Consider refinancing your loans or switching to a lower-interest credit card.

Check Your Credit Reports

Federal law requires each of the three major credit reporting companies (Equifax, Experian, and TransUnion) to furnish you with a free copy of your credit report once a year.

You can get your reports through the official website,

Check for errors and report any that you uncover right away. Credit reporting bureaus are not allowed to offer you a free credit score, but you can pay a reasonable price to receive one. Some banks offer free credit scores; however, not all of them are official FICO scores, which are the most commonly used by lenders. Begin taking action to enhance your credit score if necessary.

Revisit Your Retirement Savings

You should also assess your contributions to your company’s 401(k) plan, if you have one, as part of your financial checkup. Make sure you are contributing enough to receive any employer match.

If your contributions have already been exhausted, consider starting a regular or Roth IRA. This could also be an excellent moment to rebalance your portfolio if necessary. In general, the closer you are to retiring, the less risk you should be willing to take with your money. Target-date funds are available in many 401(k) plans and automatically adjust your risk exposure over time.

Consider Your Other Savings Goals

Examine your progress toward any other savings goals you may have, such as an emergency fund, a college savings fund (such as a 529 plan), a new-car fund, or a vacation fund. If you recently had to use your emergency fund for home or car repairs, try to replace that money as soon as possible.

Check available interest rates as well to ensure that your investments are receiving a decent return. You could look at high-yield savings accounts, for example.

Read Also – How To Avoid Lifestyle Inflation

Make Sure You’re Properly Insured

Your insurance requirements may alter over time. Make sure you have adequate life insurance coverage, disability insurance (for income protection), and renter’s or homeowner’s insurance, including flood insurance, if necessary for your location.

Read Also – Your Annual Financial Planning Checklist

Reassess your health insurance needs, including long-term care (LTC) insurance if you believe you will require it. To reduce prices, consider switching insurance carriers or upping deductibles on house and vehicle plans. You can also save money by combining multiple plans with the same provider.

Evaluate Your Estate Plan

Even if your assets are modest, you should have a plan in place for what would happen to them if you died. Examine your will or trust to ensure that you are satisfied with your choice of executor or trustee, as well as anyone to whom you have provided power of attorney.

Check beneficiaries and allocations to ensure they correspond to your current wishes. Examine your will or other advance directives. Engage an estate planning professional if necessary to ensure that any modifications you make comply with all applicable state and federal regulations.

And Don’t Forget Taxes

You can use the Internal Revenue Service‘s (IRS) online tax withholding estimator to ensure that the correct amount is deducted from your paycheck.

If you are self-employed (even part-time) or receive income that does not have taxes withheld, such as a pension, you must make adequate quarterly estimated tax payments. This will save you from receiving a large bill, as well as potential underpayment penalties when you file your tax return for the year.

As part of your financial checkup, you may wish to schedule a meeting with a tax professional to create a tax strategy.

Read Also – DIY Financial Planning: Can You Do It Yourself?

Read Also: The Ultimate Guide to Financial Planning!


How often should I conduct a financial checkup?

You should conduct a financial checkup at least once a year.

What Is a Financial Checkup?

A financial checkup examines the current health of your finances to assess their condition and whether you need to make any adjustments in how you manage them to stay on track.

When Do I Need a Financial Checkup?

Experts recommend performing a financial checkup once a year or after big life events such as marriage, divorce, birth, or death.

How do you evaluate financial health?

5 Steps to Assessing Your Financial Health
Step 1: Determine Your Net Worth (or the amount of money you actually have)…
Step 2: Determine Your Debt-to-Income Ratio.
Step 3: Establish Your Objectives.
Step 4: Create or revise your budget.
Step 5: Put money aside for the future.

What happens in a financial health check?

As the name suggests, an evaluation of your finances. The financial health checkup is based on several personal finance characteristics and includes an examination of income, expenses, savings, goals, assets, liabilities, and so on. A financial health check is the first stage in the planning process.

how often should a financial checkup be completed?


Read Also – How To Cut Financial Advisor Costs

The Bottom Line

An annual financial plan is a very essential tool for keeping financial peace of mind both now and in the future. Best-case scenario: You’ve already completed all of the items on this punch list. If not, set aside some time on your calendar to do so.

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