8 Step Financial Checkup

If you find yourself with some extra time on your hands in the upcoming months, you may want to use this opportunity to check in on your family’s finances. While conducting a thorough analysis of your wealth may sound intimidating, we’ve broken the process down into eight simple steps to keep you focused and on track.

Step 1: Analyze Your Budget

In early 2023, the Bureau of Economic Analysis reported that the average personal savings rate was only 4.7 percent. An effective way to avoid spending more than you’re earning is to step back and take stock of your monthly and annual budgets. If you don’t have a budget at all, use this time to make one.¹

Many credit cards or banks will offer categorical breakdowns of your spending, which can be a great way to find out what you’re spending the most money on and to determine if there’s room to cut back. To get the best look at your spending habits, you may want to evaluate your savings and spending record over the past 6–12 months.

Step 2: Seek Out Tax Savings

Do you scramble to pull your paperwork together every March and April? This year, try taking a different approach to the tax season by evaluating your tax-saving strategies early. You may want to work with your financial planner or tax professional to create a mock tax return, as this can help you understand your withholding options and tax-saving opportunities, such as 401(k) or 403(b) options, IRAs, and HSA contributions.

Focus on filing any time-sensitive deductions and brush up on changes in tax laws. Reaching out to your tax professional could mean that you have more time to prepare and strategize together for next year’s returns.

Step 3: Tackle Your Debt

An alarming 35 percent of adults carry credit card debt from month to month. If you’re guilty of putting off managing your expenses, now’s the time to start planning to pay them off. While most consumers have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that you’ll likely want to focus on managing and eliminating.²

While you could be tempted to simply pay off what shows up on the bills each month, you may want to create a debt summary to get a better idea of your total debt’s big picture. By creating an annual debt summary, you and your financial advisor can better understand whether you’re gradually working down your amount of debt or falling farther into the hole.

Step 4: Revisit Short and Long-Term Goals

A lot can change in a year—marriage, death, divorce, growing your family, and experiencing a major career change. Even seemingly small adjustments, such as a job promotion or sending a kid off to college, can have a significant impact on your financial status. This is why it’s important to regularly review your long-term goals and progress toward them while revisiting and evaluating your shorter-term goals.

Step 5: Evaluate Coverage and Providers

As you’re reviewing your budget and expenses, take the extra time to evaluate your current providers and coverage options thoroughly. This includes your internet, cable, and wireless service providers, in addition to your insurance coverage options. If you tend to set up auto payments and forget about your monthly bills, this could be an opportune time to revisit what it is you’re actually paying for.

Step 6: Reassess and Rebalance Your Portfolio

It’s important to visit your portfolio and risk tolerance regularly to help keep it in line with your tolerance, goals, and market conditions. While most managed portfolios are rebalanced automatically, it’s important to take stock of your investments’ big picture, as doing so can help you determine if you need to diversify differently or reassess your risk tolerance.

Step 7: Review Your Retirement Savings

Whether your retirement is decades down the line or within the upcoming year, reviewing your retirement savings on an annual basis is a great habit. Take the time to assess whether you’re maxing out your retirement contribution options and how the savings you’re making today will translate into retirement income later down the line.

Step 8: Assess Your Estate Plan

It’s not fun to plan for the worst-case scenario, but leaving your family with an outdated will, trust, or estate plan can lead to major issues down the line. As you assess your legacy plan annually, make sure you’re accounting for any newly acquired assets (houses, cars, pets, etc.) while checking that your designated beneficiaries are still willing and able to assist in the event of your passing.

While you’re likely daydreaming of reading books, going to beaches, and barbecuing your backyard this summer, don’t forget to do yourself a favor and squeeze in some financial assessment as well.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.