How to Give Yourself a Financial Checkup

The wealth of personal finance information at your fingertips is endless. We can learn about the best personal finance apps, we can learn how to max out multiple retirement accounts and we can even learn how to become millionaires. But how do we know if our personal financial situation up-to-date? Do we need a financial checkup?


Knowledge without action is akin to knowing nothing at all. So no matter what you know, make sure you’re always putting it to work. Reading about the world of personal finance is nice. But you must be always applying that knowledge or else it’s worthless to you. Here’s anything saying for you to remember: An ounce of practice is worth more than a ton of theory.


I think at least once per year we need to give ourselves a financial checkup. We need to look through ALL of our finances and see where we stand. What have we learned in the past year which we could apply? How have our circumstances changed? How have the rules of an employer or the government changed? Are we still paying the best rate for car insurance? Have the government mortgages laws gotten easier so that we’re now able to afford a home? Basically… how does your future look? All of these question are important to ask on at least an annual basis. Like with an annual physical, give your finances an annual checkup.


Getting Started with Your Financial Checkup


It’s best to first focus on the major parts of your finances. For most of us, this is our 401(k). Are we contributing enough? Are the funds allocated to the proper resources? If you want to get crazy, you can even read through some fund prospectuses. It’s important to focus on the major parts first because these have the biggest impact on your financial future.


What’s the next biggest portion of your finances? Your home? An IRA? A taxable investment account? Land? Take care of this scenario next.


Checkup on Your Large Assets


If it’s your home, how has the valuation changed? If you’d like to sell in the near future, which broker would you choose? Or would you like to sell the home yourself? It may be wise to research how to sell a house. Also, what would you like to change before you sell? An up-to-date home will sell better. Do you have a budget for these updates? Would you like to add on to the home, perhaps? Or maybe after reviewing this spending category you decide you would rather go back to renting. The choice is yours – just make sure to review your situation each year.


Retirement accounts don’t change too often. And when they do, you will be notified and you will probably take action then if necessary. But it’s important to look outward and see what you’ll do with the money when you retire.


Or you can adjust your current asset allocation if you feel it’s off balance. Rebalancing is something people often do. Basically, that means selling the funds you own which have done really well recently and then buying more of the funds in your portfolio which haven’t been doing as well. The strategy is simpler than it sounds. Think about it like this. Farmland and equities typically have an inverse relationship. That means when equities are high, farmland is usually cheap. Let’s say you have one mutual fund focused in investing in farmland. Your other mutual fund is something like the Vanguard 500 index fund which focuses on equities. In recent years, you would been buying more equities. Now that equities are doing well again, you would be buying more farm funds this year. Some people like to rebalance every quarter instead of yearly. Or you can even set your accounts to rebalance automatically. Pick what method matches your personal preference.


Taxable investment accounts are the last place most people should invest. Make sure you’re not over allocating to this fund. Though you can consider these funds easier to get than nearly any other investment vehicle. It’s good to know where you stand in case an emergency should arise.


If you own land, check on it at least once per year. How has it changed? If it’s farmland, it probably hasn’t changed much. But maybe you need adjust rental rates. Or you should do some soil samples to make sure the soil is still productive. If you own lots in a city, are there any new regulations to be aware of? Have there been any nearby sales that make you want to sell as well? Would now be a good time to buy more land/houses/apartments, etc.? Even the most passive investments require at least an annual check-in to make sure things are still going well.


Checkup on Your Everyday Accounts as Well as Retirement Accounts


You should also look over your everyday accounts. How’s the interest rate on your savings? Do you still like the bank at which your checking account is held? Throughout the year, many banks offer promotions for opening a new account. It’s not uncommon to get $100 as a promo offer. If your finances are in good shape (which they probably are if you’re reading this) banks really want you as a customer. Often you can get paid to transfer your business. Never feel glued to a bank.


The process of getting a new bank accounts is pretty simple. The easiest way is to open new similar accounts with the new institution. Then you withdraw all money from your old account until it’s at zero. The new bank will get you a debit card and anything else you need. Then you’ll need to update any automatic billpay’s you have set. And also, you’ll need to update any stores online which have your information saved. Note: Updating your information with stores can be a hassle but if it turns out to be a major hassle, maybe you could limit your shopping and work saving money into your financial checkup plan.


Challenge Your Bills Annually as Part of Your Checkup


It’s also a good idea to challenge your bills each year. Make sure you’re happy with what you’re paying. Doing so isn’t tricky and it can be really fun actually. Here’s how it’s done:


Ask for discounts. If you want something, ask for it. Say that since you’re a loyal customer, you’d like some sort of reward. For ideas, see what new customer promotions you’ve seen ran in the past. Ask if you could get those same perks as well.


Shop for cheaper rates. Think hard about whether or not you still find the service worth the price. A lot changes from year to year with services. Make sure to challenge each bill year after year.


How will you start your financial checkup?