How to Do a Financial Checkup

When it comes to personal finance, are you on the road to financial freedom, or do you need a financial checkup? If money is a pain point, know this: you are not alone! 

Luckily, getting on a better financial track is possible—if you know which steps to follow. And the first step is doing a financial audit to see where you stand.  

Here are 8 tips to help you conduct an audit of your financial health.  

Review your budget 

A financial checkup starts with reviewing your budget or creating a budget if you don’t have one. A budget tracks money going in and out—it’s also a living document that can change as your income and expenses fluctuate. That’s why it’s a good idea to audit your budget regularly and make sure the way you’re spending money aligns with your goals.  

If you don’t have a budget, here are steps to build one: 

  • Get clear on your expenses. Use a pen and paper or spreadsheet to make a list of your monthly expenses, including: 
    • Fixed costs: Bills that stay the same from one month to the next, like rent, phone, car payments or childcare. 
    • Variable costs: Expenses that change month after month, like groceries, gas, grooming or dining out. 
  • Double-check your statements. Use your bank account and credit card statements from the past few months to find any expenses you miss.  
  • Make budget adjustments. Look at what you have been spending money on and consider reducing expenses in non-essential areas to devote more money to goals like saving or paying off debt. You could also try reaching out to service providers to negotiate reductions on fixed bills, like your phone service or cable.  
  • Track spending going forward. The most important part of a budget is sticking to it and reviewing it regularly to stay on track. Consider scheduling a money date biweekly or weekly with yourself or a partner to review how well you’re sticking to the budget.  

There are great apps today that can help you create a budget and track spending. Some even have tools to categorize transactions, like entertainment, rent and healthcare so that you can see your spending at a glance.  

Check your credit score 

The next step in your financial audit is reviewing your credit health. Your credit score is important because creditors use it to decide if you qualify to borrow and at what interest rate.  

Checking your credit score and reports can help you identify errors or fraudulent accounts. And you can identify areas where you could make score improvements. For example, paying off credit card debt to reduce your credit usage is one move that can help your score. 

And remember: you can check your credit score as many times as you want without any repercussions. 

Determine your debt 

Another key piece of any financial audit is understanding debt and coming up with a plan to pay down debt. If you find that you’re struggling with high-interest credit card debt and need to get on a new path, consider: 

  • Consulting a financial expert for advice or  

A personal loan is a great option because it can help you combine all your existing debt with fixed monthly payments. Shop around, consider any related fees and make sure you select a reputable lender to avoid unforeseen expenses such as prepayment penalties.  

Don’t (over) tax yourself 

The next step in the financial check is tax planning, which you can do with the help of a tax professional at any time of the year. They can guide you on what financial moves you can make to get a tax break, like contributing to a retirement account or a child’s education savings fund.  

Also, consider that it might feel good to get a refund check from the government, but routinely receiving refunds may mean that your tax withholding could be too high. 

When you get money back, it means you’ve essentially had the government hold that money when you could’ve saved or invested it.  

On the flip side, if you routinely owe the government money, ask your tax expert if you should adjust your W-4 so that you’re closer to even when April comes.  

Evaluate your insurance 

Another simple thing to check on during a financial audit is your insurance coverage. Make sure you’re factoring in any big life changes and adjusting your coverage accordingly.   

For example, if you’re planning to have a baby in the next year, consider updating your health insurance plan to one with higher monthly payments and a lower deductible since you know you’ll hit your deductible early with hospital bills.

Save for an emergency 

You can’t predict life’s twists and turns, but you can prepare for them. Experts recommend having enough savings for about six months’ worth of expenses. If that sounds like a lot to build up, start small. Transfer a set percentage of your paycheck into savings each month. Even $10 weekly will add up and could be crucial if financial disaster strikes. 

Review your investment and retirement plans 

Making sure you have a diversified portfolio is key to long-term financial wellness. If you’re just starting out, talk to a financial advisor about investing in the stock market. Ensure you’re also personally investing in your future by creating or adding to your 401(k) or retirement savings plan each month. 

As you get older, consider shifting your investments, so a higher percentage of your money is invested in less volatile vehicles like bonds instead of stocks. That ensures that the closer you are to needing your money, the more stable it will be.  

Allow an occasional splurge 

Spending too much on nonessential things can set you back. However, it’s unrealistic to cut out extra spending entirely. Think of it like dieting—if you’re too strict with yourself, you’ll end up feeling deprived and eventually binge in an unhealthy way.  

The same is true with your finances. If you find the right balance of saving and spending, you’ll be happier with where you stand financially—now and 20 years from now.  

Money habits get better with time 

A financial checkup isn’t meant to get you feeling down about money, so if you’re not where you want to be, give yourself grace. After auditing where you stand, you can build better money habits and financial literacy over time. And by giving yourself a financial checkup regularly, you’ll know if you’re on track to meeting your goals or if you need to make adjustments. 

Written by Taylor Medine | Edited by Rose Wheeler

Taylor Medine is a writer who’s covered personal financial topics from budgeting and saving to paying down debt for more than eight years. She got her start demystifying intimidating money topics for the everyday consumer on a personal blog, and has since been published on Experian, Forbes Advisor, Credit Karma, and more.

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