Financial Health Checkup: 7 Steps To Boost Your Fiscal Wellbeing

Stethoscope and cash for financial health checkup

Why a financial health checkup is important

When your doctor asks about your health, you probably respond with how you’re doing physically, mentally, or emotionally.

But, have you ever considered the state of your financial health?

Many of the same principles you use to improve your mind and body also apply to strengthening your financial wellbeing.

Having goals, measuring progress, and changing your mindset are all critical to achieve a healthier state – for your body, mind, emotions, and finances.

If you’re struggling to get out of debt or break the paycheck-to-paycheck cycle, it’s likely you’re neglecting your financial health.  This can lead to additional stress on your physical, mental, and emotional welfare.

That’s why it’s important for your holistic health to include financial checkups in your regular wellness routines. 

When you monitor the indicators of personal financial health,  you can strengthen your money management and mindset.  By implementing good financial health tips, you can determine the next best steps on your journey to financial freedom.

Learn how to stay on track financially and keep your money matters in top shape by doing a financial health checkup of these 7 areas.

#1  Your net worth

Get an overall picture of your financial health with one number by calculating your net worth.

This metric is the sum of what you own minus what you owe.  The number is a snapshot of how you’re currently doing financially.  It also gives you an idea of what areas you need to work on.

A negative or low net worth indicates excessive debt and poor financial health. A higher net worth is a reflection of good financial choices and accumulation of assets.

Don’t overcomplicate this calculation – just make sure you’re thorough to get the most accurate result.

And don’t put too much weight on the final number you get.

Knowing the number isn’t as important as having a plan to increase it. 

So, whatever it is, take that information to figure out how you can make it larger.  Consider every financial decision as an opportunity to increase your net worth.

#2  Your budget

If you’ve been a faithful budgeter, you should review how you’ve been doing with your spending plan.

Whether you use a spreadsheet, a digital tool, or pen and paper, analyze your chosen tracking system over the previous 3 to 6 months.

Once you have a good idea of your spending habits, answer these questions (honestly!):

  • Are you staying within the boundaries you’ve set for each category?
  • Which areas are you consistently overspending?
  • Can you identify expenses that could be lowered or eliminated?
  • Are you satisfied with your savings?

Then, determine if you need to make adjustments so it fits better with your spending patterns.  Make sure your financial decisions align with your values and goals.

I’ve had to tweak my grocery budget to add more allowance, but found I was able to lower what I needed for transportation.  This is a great benefit to tracking your money.

You can tell at a glance how your money is flowing and then choose to redirect money where it needs to go. 

This is being in control of your finances!

If you’ve been thinking about starting a budget but haven’t gotten around to it, now’s the time.  You can create a budget using the zero-sum method, and make sure every dollar is working for you.

To keep your financial health in shape, you need to know how you’re using your money.  Knowing your net worth is like having a birds-eye view of your finances, while a budget gives you a close-up picture with more detail.

#3  Your emergency fund

Any financial wellness checkup needs to assess a liquidity ratio.

Basically, you should be monitoring your liquid assets and know how long your savings would support you if necessary.

Many financial advisors recommend 3 to 6 months of savings in case of a financial crisis. If you’ve been diligent with building an emergency fund, do a quick review to calculate the gap between what you have and what you need.

If you haven’t made savings a priority, open up a high-yield savings account and start contributing to it consistently.  Start small if you have to!  Even if it’s just $25.

Have a goal for how much you want to save, and then find money in your budget that you can start redirecting to this account.

One of the best ways to build an emergency fund is to automate your savings contributions.  Set up a direct deposit or automatic transfer to go straight into your savings account.  This way, you can bypass the decision to do it and go straight to getting it done.

Building an emergency fund takes time, patience, and dedication. 

Don’t get discouraged if it’s taking longer than you thought it would.  Stick with it, adding to it as you can.

And when life serves up a “what if”, you’ll be glad you did.

#4  Your debt balances

Your financial health is compromised by high debt balances.  However, American culture has made it so easy for us to *stay* in debt that being debt-free is one of the most difficult things to accomplish.

To do a debt checkup, compare your balances now with what they were six months ago.

  • Is your overall debt balance lower?
  • Have you added any new debt?
  • Are you making more than the minimum payments?
  • Do you think you could lower any of the interest rates?
  • How is my debt affecting my net worth?

A great way to make progress on a debt payoff plan is to keep a debt tracker.  This could be a spreadsheet or a graph, on paper or the computer.

You want one central place where you track all of your debt balances so you always have a complete and accurate picture.

Don’t avoid your debt!

It’s easy to just pay the minimum balances and ignore the real cost of interest. But, this is only damaging your financial health in the long run.

Make it a priority to get your debt paid off, so you can stop paying others and start paying yourself.

#5  Your income

There are only so many expenses you can cut, but the opportunities to increase your income are limitless.

Your ability to earn more money is the foundation to building wealth, and improving your financial health.

Of course, everybody would like to make more income.  Unfortunately, few people will ask for it.

If you’ve been working hard toward a promotion, make sure your manager knows your intentions.  Then, show him through your performance why you deserve it.

It’s also a good idea to reflect on job satisfaction.  Take some to time to reflect on how satisfied you are with your employment.

Are you still enjoying your career?
Are you being recognized for your contributions?
Are you satisfied with your income and the growth that is possible?

If not, think about what you can do to improve your situation.  This might mean transferring to a different department, company, or even field.

Making a change can sound kind of scary, especially if you’ve been in the same job for a while.  However, if you want to reach your income goals, you’ll need to be intentional about promoting yourself and creating new opportunities.

The last thing you want to do is settle for what you’re used to. 

Yes, you’ll need to go outside your comfort zone to demand your worth.

But, just think of how you’re taking care of your future self and financial health if you do.

#6  Your retirement account(s)

Every financial health checkup should include an assessment of how you’re progressing toward your retirement goals.

If you have a 401(k) through your employer, you want to contribute *at least* as much as your company will match.

But, as you get closer to retirement, you should increase that percentage and get as close to the contribution limit as you can.

For 2020, the maximum amount you can contribute to a 401(k) is $19,500.  But, if you’re over 50, you can also make a catch-up contribution of up to $6,500.

That’s a total of $26,000 a year you can put in this retirement fund.

If you have a traditional IRA, the annual contribution limit for 2020 is $6,000.  The catch-up contribution for those 50 and older is $1,000 a year.

So, for those 50 and over, you would need to put in about $2,166 average a month to max out a 401(k), and a little over $583 a month to the IRA.

If you haven’t increased your contribution percentage in a while, look over your budget and see if you can find some discretionary income that can be funneled into your retirement accounts.

The smart strategy is to maximize tax-advantaged accounts as early as possible.

This way, your investments have time to grow with compound interest.

#7  Your personal goals

Life isn’t all about money, right?

You have other dreams, like traveling the world or having a lakeside cabin in the mountains.  However, your goals do inform your financial objectives. 

You need the money before you can make them come true.

Review your progress toward your 2020 short-term goals in areas such as family, health, charitable, and personal growth.

Are your finances aligned with these personal goals?
Are they accounted for in your budget?

What about your long-term goals?
Have you created a plan to accomplish those?
And how will you need to adjust your finances to support that plan?

Your personal goals are indicative of what you value. 

If you find that you struggle with achieving them, then you might want to spend some time reflecting on your mindset about money.

Don’t short change your financial health because you want immediate gratification.  Consider what negative habits might be holding you back from progress, and the positive ones you can replace them with.

Make your financial health check up a priority

I don’t know about you, but 2020 is flying by for me.  I think it has something to do with getting older.  I can’t believe I now have 2 adult children and my youngest is in high school.

If I’m not careful, I’m going to blink and find all my kids married – with their own kids.

The daily minutiae of life can keep us busy and distracted with what’s right in front of us, making the days all start to blur together.

If you haven’t felt the pulse of your finances lately, it’s time for a financial health checkup.  Make it a priority to make adjustments, celebrate progress, and recommit to your financial goals.

If your financial health is suffering, I encourage you to keep moving in the right direction.  Every step forward to better money management is one step closer to increased fiscal wellness.

Don’t get discouraged or beat yourself up.  Each day is just as good as any to pick yourself up and start where you are.

By taking the time a few times a year to evaluate your finances, you can ensure that you never stray too far from what’s important to you.

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Small bag of coins with leaf coming out and text overlay: Financial Checkin Get on track in these 7 areas

Financial Health Checkup: 7 Steps To Boost Your Fiscal Wellbeing

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