Every year many adults have a health maintenance exam or, what is more commonly known as, an annual physical. During these annual physicals your primary doctor goes over all aspects of your health with you to determine if you are on the right track, or if you should make changes toward a healthier lifestyle.
While reviewing your health every year is very important, you should also consider an annual financial check-up as well. Are you on the right track for hitting your short and long-term goals? Do you need to make some changes, or is there something you need to do that you have been postponing?
As the end of the year is nearing, take time out to review everything. If you have a partner, make sure they are invited to the review party as well.
Here are 7 elements you should have on your annual financial review agenda:
1. Identify and Re-assess Your Short and Long Term Goals
Maybe you haven’t put your short and long term financial goals in writing, or maybe the goals you thought of last year aren’t relevant any longer. First things first, before you review your current financials, you need to figure out your goals. Write them down.
2. Create a Budget
Go over your bills and bank statements. Are there areas you can cut expenses, such as going out to eat for dinner less often, or maybe skipping the movie theater and go with Netflix instead? Is one of your short term goals a vacation or new car? Review your budget to see where you can find extra funds to help reach your goal easier next year.
3. Analyze Your Bills
Paying bills has been made easier with the efficiency of automatic payments. These days everything from the mortgage payment to credit card balances can be paid in a “set it and forget it” method. Auto paying directly from your checking or savings account is beneficial because it ensures you never forget a payment, but it also means you might not ever think to review them.
Are there places you could be saving money? What about refinancing your mortgage, or consolidating your credit card debts to the one with the lowest interest rate? Do you have different insurance policies with different carriers? See if perhaps combining both your home and auto insurance with the same company could get you a discount. Also, don’t forget to review your cell phone and cable bills. Are you paying for extras that you don’t even use? Taking the time to examine all your routine expenses can end up saving you a good amount of money.
4. Look Over Your Taxes
Do you need to adjust your tax withholdings? Are there any deductions you’re missing out on or expenses that can be itemized? Take a look at 9 Things You Didn’t Know Were Tax Deductions article by TurboTax and see if you may be able to lower your tax bill or increase your refund.
5. Prepare for the Unexpected
Do you have an emergency fund? You should have enough savings to cover at least 3 to 6 months’ worth of expenses.
Do you have a will in place? You should have in writing what your wishes are in regards to the distribution of your property and assets, and, especially important, who would be the guardians of your minor children if something happened to you.
See what you’d pay for life insurance
Do you have life insurance? I’m sure you have heard of families whose lives have financially crumbled from the unexpected loss of a primary breadwinner. Unfortunately, it happens all too often. Term life insurance can be extremely affordable and can save your loved ones from financial struggle if you died prematurely.
If you already have life insurance, be sure to review your coverage. As you age, your life insurance needs change. Buying a house, having a child, getting married, changing jobs, all these events bring on the need to review your policy.
6. Review Your Retirement Plans
Do your current retirement plans follow your long-term retirement goals? If your employer offers any 401(k) contribution matching benefits, be sure to take advantage of this. This is one of the easiest ways to fund a retirement.
Advisors recommend putting away at least 15% of your pre-tax income toward your retirement, and as you near retirement, move away from riskier, more aggressive investments, such as growth stocks, toward safer vehicles, such as bonds.
7. Get Your Credit Report
Federal law allows you to obtain a free copy of your credit report every year. Check your credit report regularly to make sure the information in your credit reports is correct. Your financial reputation follows you wherever you go, so be sure to keep it in good standing.
Taking the time to really dig through your financials can be a lot of effort, but make the best of it. Grab a bottle of wine, throw down a plate of cheese and crackers, whatever you need to make it not such a drab affair. Chances are after you are through you’ll feel particularly accomplished and hopefully will even have discovered some ways to save money. With a little work, you’ll be much more prepared to face whatever financial battles may come your way.
Watch the Annual Financial Review Video
About the writer
Natasha Cornelius, CLU
Senior Editor and Licensed Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.