As we begin 2017 and head toward tax season, now is the perfect time to run a checkup on your finances. Like a routine physical with your doctor, an annual financial checkup will help expose risks and establish the preventive care needed to keep you healthier in the long run. Unlike a physical, you can run this checkup on your own by assessing the following areas:
Life Goals
As Yogi Berra said, “If you don’t know where you’re going, you’ll end up someplace else.” So it goes with your finances. You may not know exactly where you want to go, but you want to be financially secure when you get there. It’s important to establish manageable goals for yourself and your family, and track progress from year to year. What you want may change with time, along with your circumstances or desires. If you haven’t set goals yet, here are some to consider:
- Retire comfortably.
- Save enough money for an important milestone, like having a child or buying a home.
- Protect yourself and your family from calamity.
From there, it’s only a matter of setting up a plan to help you achieve those goals—and sticking to it.
Your Budget and Savings Plan
Now your refreshed life goals need a budget and savings plan to match. This is possible to do at home using online resources such as savings calculators, or with the help of a financial planner. When you set aside the necessary savings, what’s a realistic budget based on your actual spending habits? If you already have a budget plan and your life goals haven’t changed, it’s still worth revisiting to make sure you’re still on track.
New Year’s Resolutions
According to Nielsen, 29 percent of Americans resolved to “spend less, save more” in 2016. If you’re the type to make New Year’s resolutions, did you make any relating to money this year? Are they reflected in your budget and savings plan? Ensure you’re able to stick to that resolution by coming up with an actionable plan that keeps you on track. For instance, if you want to spend less and save more, consider taking a look at your budget and spending habits from last year. What realistic steps can you take to cut back, hold yourself to your budget and incentivize yourself to save?
Life Changes
Amidst the flurry of a life change, just keeping up feels like enough—let alone sitting down to reexamine your finances. Did you have a child recently? Get a new job? Buy a house? All of the above? Perhaps you finally started that business you’ve been dreaming of. A child or a new house calls for added insurance policies. A new job could mean new benefits and changes to your retirement plan, or if you’ve become your own boss, you’re probably discovering the challenges of self-employment taxes. Taking time to take stock of your situation can help prevent unexpected expenses, financial burden and added stress later. In times of great change, give yourself peace of mind by tackling these to-dos ahead of time.
An Emergency Fund
Has an emergency fund been part of your savings plan? If not, or if it hasn’t received the attention it needs, you’ll want to make sure it does. When life’s “uh-oh” and “oh, no” moments strike, you’ll find relief knowing you are financially prepared to cover the unexpected. Not sure how much to save? A general rule of thumb recommends having three to six months of pay on hand, depending on your circumstances.
Your 401(k) Contributions
Whether retirement is a distant aspiration or quickly approaching reality, now is the time to check in on your retirement savings plan. If your company provides a 401(k) plan and—even better—matching contributions, ensure that you’re taking full advantage of the extra savings. This pre-tax contribution means you likely won’t miss the money, and you’ll be grateful for it later.
If you’re further along in your career and set your contributions years ago, make sure they’re still appropriate for your age and salary. And for those looking forward to retirement in the next 10 to 15 years, double- and triple-check that you’re on track. Retirement is no longer an abstract concept, and it’s likely you now have a better sense of the lifestyle you’ll need to support with your savings. Take a hard look at your projected savings against the expenses you’re anticipating. If it looks like you might come up short, talk to an investment planner about ways you can adjust your investments to catch up.
A Professional Checkup
Yes, you can do a financial checkup on your own, but as with most things, it never hurts to get a professional’s opinion. A financial planner can provide a comprehensive assessment of your financial needs and make recommendations. They know the ins and outs of the broader financial world and can recommend an appropriate investment strategy, budgeting tool or better savings account that you may not be aware of.
We dread that yearly physical or dental checkup, but deep down, we know it’s important for our long-term well-being. As soon as you get done scheduling that appointment with your doctor, schedule another one with yourself and a calculator—or with a financial planner. Your future healthy, happy and financially secure self will thank you for it. iBi
William J. Phillips is a senior vice president and retail executive for the Illinois Market for Commerce Bank.
