A Quick Check-up for Better Financial Health
To stay healthy, we schedule a physical with the doctor each year. To keep our cars running smoothly, we visit the local auto shop for an oil change and a tire rotation. And to make sure our houses stay comfortable, we have our heating and cooling systems evaluated regularly.
These check-ups take a little time, but they’re important. After all, we need to be ready for what’s around the corner.
Surely your finances deserve the same good treatment. An annual financial health check-up can give you the opportunity to reflect, reset and plan for the future – and you can perform it yourself in the comfort of your living room.
Here are four simple steps to make your financial health check-up an easy, quick, and painless process that will bring you financial clarity and help get you ready for the new year.
1. Get Organized
No doubt, the best way to conduct a financial health checkup is to create a master spreadsheet to track your numbers and metrics over time. A spreadsheet allows you to see growth, attrition, and rolling balances from year to year.
But not everyone is an expert in Excel. Luckily, a number of user-friendly apps are here to help. Personal Capital, Empower, Acorns and Mint are examples of easy-to-use apps that allow you to connect all of your accounts and automatically see where you stand.
2. Track These Metrics
If you find you have important financial information an app isn’t able to track, you can always dig into the numbers yourself. Here are a few metrics you’ll want to include in your review:
- Household net monthly income
- Income tax rate
- Your family’s emergency fund balance
- Interest rate on your savings
- Your Investments (529 College Savings Plan, 401k, etc.)
- Debt-to-income ratio
- Credit score
- Total net worth
You won’t need to get super detailed on any of these metrics. The simple act of identifying where you stand in each category will help you take the pulse of your family’s financial status.
3. Diagnose and Celebrate
The most meaningful parts of a financial health checkup involve celebrating where you made headway in 2020 and diagnosing areas for improvement.
If you find an area where you missed the mark - such as taking on more debt than you would have liked - figure out why it happened and write down some goals to keep you from making the same mistakes next year.
If you find an area where you met a goal or exceeded expectations, celebrate! We’re often quick to judge ourselves for coming up short and slow to reward our smart decisions. Create space to feel good about what you’ve accomplished over the past 12 months.
4. Take Time to Dream!
Now it’s time to dream about next year. Research shows a close correlation between goal-setting and feeling both self-confident and in-control. Research also shows that taking the time to write down your goals will make you 33 percent more likely to achieve them!
You should try to be as specific as possible. If, for example, your goal is to begin contributing to a 529 college savings plan for your three-year-old son, don’t just say you want to make some contributions.
Actually, create a game plan and put it into action. It might look like this:
- Log on to the Future Scholar website and figure out how to open up an account.
- Set up automatic contributions for each month.
- Ask friends and family to make contributions instead of giving toys for holidays.
- Track performance and report contributions on your state tax return.
Congratulations! You’ve put your child on the path to college!
More about a Future Scholar 529 College Savings Plan
Future Scholar is South Carolina’s official 529 College Savings Plan. By opening up an account and making regular contributions, you can help save today for your child’s future college education. You’ll enjoy tax advantages, flexible investment options, and the potential to grow your savings over time.