For many people, the path to financial security involves many ups and downs along the way. Making regular check-ins with yourself is one approach to make sure you’re moving closer to your long-term objectives.
“The Savage Truth on Money” author and nationally syndicated personal finance writer Terry Savage advises readers, “Don’t be an ostrich when it comes to your financial situation.”
“Just because you don’t look doesn’t mean that nobody else is looking. For instance, the credit bureaus log each payment you make and draw attention to any late payments, according to the speaker.
The following questions can serve as a quick financial health check for you and possibly highlight areas where you might be able to make improvements to get on sound financial footing.
1. Do I Have Enough Money for Emergencies?
Most experts advise keeping three to six months’ worth of spending in a liquid savings account you can use in the event of an emergency or if you lose all or part of your income.
If you have numerous dependents or an unsteady job, you could need a larger emergency fund; if you’re single and have a solid job, you might need a smaller one.
Start small if saving for six months seems daunting. Regularly setting aside even a small sum of money can soon add up to a safety net that will keep you from having to use your credit card or take a loan out of your retirement account in an emergency.
2. How Much Money Do I Have?
You may figure this out on your own by deducting the total of your assets (such as the balances in your bank accounts and investments, the equity in your home, etc.) from the total of your debts (such as your mortgage, auto loans, etc.).
The fact that the number is heading in the proper direction is more significant than the number itself.
“Once you know your net worth, you are able to continue track it to make ensure that as the months or the year goes by, you’re increasing your net worth, not decreasing it,” advises Anne-Lyse Ngatta, a champion of financial literacy and the creator of the personal finance website Dream of Legacy.
3. Do My Purchases Align With My Priorities?
Each person has various financial priorities. For instance, some shoppers would want to make sure they’re exclusively buying environmentally friendly products, while others might feel that spending money on experiences rather than stuff should be the objective.
According to Jesse Mecham, the creator of the money management tool YNAB, “this question will help you identify if there are areas in your expenditures that you can cut back on or areas where you want to pour more into.”
If you are unable to provide a response, it may indicate that you lack control over your spending habits. To better understand where each dollar goes and how you feel about your expenses, the first thing to do in that situation would be to keep track of your spending for a month or two.
The first thing to do in such circumstance would be to keep track of your expenditures for a month or two in order to get a sense of where each dollar goes and how you feel about your expenses.
4. Have I bought the right insurance?
An essential component of preserving financial stability is having enough coverage for your car, house, life, health, and disability insurance.
Although your demands may change over time, it’s crucial to do an insurance audit on a regular basis to ensure you have enough coverage to safeguard you and your loved ones in the event of a catastrophe.
5. Do I Have a Financial Blueprint for My Life or a Financial Planner?
According to data from Hearts & Wallets, those who have documented financial plans had larger savings, better-allocated investment portfolios, and a greater sense of financial confidence.
The author of “Effort-less Wealth: Effective Habits at Every Stage of Your Life,” Tom Corley, believes that if you don’t have anything in writing, you’re like a leaf on a fall day.
You won’t receive any direction and will simply float around.