How to Do a Financial Checkup

Performing a financial checkup can be the key to achieving your money goals.   

Unfortunately, a survey from Schwab found that only about 36% of Americans have a financial plan. In other words, most of us leave our future financial stability up to chance.  

Instead of hiding from the numbers or hoping for a winning lottery ticket, you can use these simple steps to check in on your finances and turn things around. Even if money is tight, this audit can help you find areas for improvement and take steps toward your financial goals.   

How to conduct a financial wellness checkup in 10 steps

In the Schwab survey, the top reason people gave for not having a financial plan was not having enough money. But by conducting a financial checkup, you can better your situation, regardless of your starting point.

Here’s a simple process anyone can follow to audit your financial health and create a plan to improve it, even with a small budget:

1. Write down your goals

A financial checkup starts with getting clear about your financial goals. Because if you don’t know where you want to go, you can’t create a useful plan.

Instead of just hoping your finances will improve, get specific about what you want. Write down timelines and dollar amounts to break down each goal and add it to your plan.

Keep in mind that some financial problems can keep you from making progress, so we recommend putting these goals (in this order) at the top of your list:

• Pay off credit cards or other high-interest debt
• Build an emergency savings fund equal to 3-6 months of your income. Start by saving just one month’s rent if your budget is tight
• Make contributions to your retirement savings from each paycheck
• Leave money or physical assets for loved ones

✨ Quick tip: 

Even if you’re young, make sure to include your retirement goals. While retirement may seem too far away to consider, starting early means you’ll be better off down the line.

2. Take inventory

Some people hate the idea of creating a budget, so it can be helpful to think of it as taking inventory of your finances. To start the inventory, list all your monthly expenses and compare them to your monthly income.

The best way to make sure you don’t miss any expenses is to look at your most recent bank and credit card statements and digital wallet transactions.

Then, add occasional expenses like holiday shopping, travel, vehicle maintenance, and any big purchases you’re planning.

Add them to your list to ensure your income is enough to cover it all. If your car registration is $240 a year, for example, divide it by 12 and add $20 to your monthly list.

✨ Quick tip:

Great budgeting apps like You Need a Budget and Empower can help you track your spending and categorize transactions for easy viewing.

3. Determine your debt

The next key piece of any financial audit is 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
• Consolidating your debt by taking out a personal loan

✨ Quick tip:

Consider consolidating your debt with a personal loan that offers a fixed monthly payment. Take the time to compare reputable lenders to avoid unexpected fees.

4. Shake up your spending priorities

Once you understand your spending and debt, you can begin to make adjustments that align with your goals.

You may decide to temporarily spend less on dining out or clothes shopping so you can allocate that money toward another goal you defined in Step 1—such as retirement contributions, paying off debt or saving for a down payment.

If you’re struggling to make the numbers work, try these tips:

• Cut some non-necessities temporarily to jump-start your progress
• Start with the biggest expenses for the most impact. Consider how you can reduce, omit or delay the cost
• Give yourself more cash to work with by looking for a higher-paying job or making a career change. Seek annual pay increases so your income keeps up with inflation

✨ Quick tip:

When you’ve determined where your money will go, try to automate as much as possible.

For instance, you can set up automatic deposits to your savings and retirement accounts or increase the amount of your monthly payment that is automatically applied to your credit card.

5. Check your credit score

The next step in your financial audit is reviewing your credit health. Your credit score is important because it impacts many areas of your life beyond just borrowing money.

Lenders, landlords, insurance companies, and even potential employers may use your credit score to make decisions about you.

Checking your credit score and reports can help you identify errors or fraudulent accounts. And you can identify areas where you could improve your score.

For example, paying off credit card debt to reduce your credit usage is one move that can help your score.

✨ Quick tip:

You can check your credit score as often as you like without any negative impact. Use free apps like Credit Karma for VantageScores and consider Experian’s paid subscription for FICO scores. You can also get a free copy of your credit reports on AnnualCreditReport.com.

6. Don’t (over) tax yourself

When it comes to taxes, balance is key. Getting a tax refund might feel good, but it could also indicate that your tax withholdings are too high. On the flip side, owing money at tax time can be stressful.

The goal is to pay just enough throughout the year to avoid both scenarios. Review your past few tax returns to get a feel for how much you owed or got back and whether you’d like to adjust your withholdings moving forward.

✨ Quick tip:

A tax professional can give you advice on how to adjust your W-4 or find tax breaks that save you money, like contributing to a retirement account or a child’s education savings fund.

7. Evaluate your insurance

Another important aspect to review during a financial audit is your insurance coverage. This includes:

• Health insurance
• Life insurance
• Home or renter’s insurance
• Car insurance
• Any other policies you have

Review your coverage and adjust it accordingly.

For example, if you plan to have a baby soon, you might switch to a health insurance plan with a higher monthly payment but a lower deductible since you know you’ll hit your deductible early with hospital bills.

Or, if you just bought a house, you may want to increase your life insurance policy to cover your mortgage.

8. 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.

✨ Quick tip:

As you age, consider shifting your investments so that 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.

9. 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.

10. Consult with professionals

Managing money can require you to be knowledgeable about credit, debt management, taxes and more. Yes, you can do it on your own with lots of research and time, but it doesn’t hurt to get a second opinion from a qualified professional.

If you need free support, start by contacting a certified credit counselor. Consider working with a licensed financial advisor for help with tax, retirement, and estate planning.

You can feel better about your finances

The idea of taking a deep-dive into your finances might be stress-inducing. However, according to the Schwab survey, people with a financial plan feel better about their finances.

Sure, no one wants to cut back on fun things like online shopping or dining out, but conducting a financial checkup and creating a financial plan reminds you that you’re passing up temporary pleasures to build the life you really want.

Frequently asked questions about financial checkups and planning

How often should a financial checkup be completed?

A financial checkup isn’t a one-and-done fix; it’s something you do periodically. If you don’t revisit your goals and make adjustments when your income and expenses change, it might not get you far.

Instead of setting your plan aside, choose a recurring date when you’ll review your progress. Then, add it to your calendar to make sure you keep it up.

Some of these things (like updating insurance) you may only need to do once a year. But other things (like tracking your spending and monitoring your debt), you’ll want to do at least monthly or weekly.

What is a financial health check?

A financial health check is a personal financial review where you strategize ways to reach your goals. This can include creating the steps you’ll take to pay off debt, save for a big purchase, retire, minimize taxes, and more.

Who can do a financial review?

If you want professional help with your financial checkup, you have a few options. You can hire a Certified Financial Planner (CFP) or a Chartered Financial Analyst (CFA) to help you with tax planning, estate planning, wealth management and other financial needs—all for a fee.

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