Time for Your 2011 Financial Check-up

January 7, 2011

Now that we have finished celebrating for the new year its a great time to do a financial checkup to find out how you’re doing. That way, you can make course corrections and ensure that you’re remaining on the path to financial success you are hoping for.

Your fiscal health affects your overall sense of well-being, self-confidence, and happiness more than anything else. Once or twice a year, it’s important to evaluate where you are financially, where you’re going, and how best to get there.

Here is some advice on how to perform a personal financial checkup that will help you experience the peace and prosperity you are hoping to accomplish:

  • Identify where you are. If you don’t have a family or personal budget, now’s the time to create one. Simply list your income and monthly expenses. Any time you spend money, write it down. Simply being aware of your spending habits and the amount of money you have available will cause you to make more sound financial decisions. If you already have a family budget, now’s the time to make sure that all of your expenses are listed in the budget and funded accurately. An updated budget is your road map for your journey into the next few months. The more clearly you see your current financial status, the more motivated you’ll be to make the changes you need to reach your goals.
  • Identify where you want to go. If you’ve already established financial goals, evaluate whether those goals still make sense in light of your current situation. Think about what’s most important to you, and match your financial budget and goals to those values. Include a fun purchase or vacation to keep you motivated.
  • Create or bolster your emergency fund. The backbone of any financial plan that truly provides comfort is a fund that can pay for unexpected expenses. If the car or air conditioner breaks down, your emergency fund makes sure that all the financial claims you made above stay intact. While other families struggle to make ends meet, falling behind at the first unexpected expense, you can enjoy the peace of mind that comes from knowing that you’re covered no matter what goes wrong. This can only come from a well-funded emergency fund.
  • Review your insurance coverage. As the circumstances of your life change, your needs for protection may change as well. Look over your homeowners insurance, health insurance, and life insurance and make sure your coverage meets your current needs. Also consider disability insurance, especially if you provide income that your household counts on.
  • Establish or update your will. While the end of life is an uncomfortable subject for many, it’s important to have your affairs in order for those you may leave behind if something should ever happen to you.
  • Evaluate your investments. How’s your investment portfolio performing? Are you investing in the right vehicles to match your retirement, college savings and other goals? You may want to seek the advice of a financial advisor if you’re unfamiliar with this area of your financial picture.
  • Adjust your tax withholding, if necessary. Many people provide the federal government with an interest-free loan every year. At the end of the year, you should be close to breaking even. Instead of receiving a large refund, adjust your deductions and use a savings or money market account to make interest off the difference.
  • Think about upcoming life changes. Do you anticipate anything big happening in the near future? Is your car getting old? Are there any medical expenses for a surgery or pregnancy that’s coming up? To complete your checkup, think through upcoming expenses that are outside your normal budget and plan ahead.
  • Once you’ve set yourself up for financial success by reviewing these areas of your family’s plan, repeat this personal financial checkup once or twice a year. The keys to financial success are awareness, determination to succeed, and the ability to dream big dreams. Your personal financial checkup is the road map that will keep you on track.

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