Annual Financial Checkup
Like you have annual checkups for your pets, your vehicles and your health, it is also very important to do an annual financial checkup. Annual financial checkup is an opportunity to measure and examine the progress you are making toward your goals.
You should do a financial checkup at least once a year, or with every major life event such as getting married, changing jobs, a death in the family, divorce, having a child, business startup or expansion, renting or buying a house, etc.
Following are the steps to do an annual financial checkup –
- Classify Your Goals – Start by reviewing and calculating your financial goals. Have you worked towards them in this year? If not, what happened? Have you made progress on them this year? If not, where have you fallen short? Revise your goals and timelines; make sure you write them down.
- Evaluate Changes – Look at the changes you have faced in your life during the last year or do you anticipate any changes in the near future like getting married, job change, having a child, etc. These events or changes can significantly change your financial condition. You may need to adjust your savings, your spendings, your investments, and your budget. A proper planning for these changes in advance will make the alteration much easier and smoother.
- Assess all of your insurance policies – Review your health insurance policy, life insurance policy, auto insurance policy, home insurance policy, etc., and ensure that any major life changes are reflected in the policy.
- Review your will – Take a look over your will, and if applicable, your estate plan. Ensure that you have updated or modified it as your family has changed. For instance, you got married or divorced, or you had a child this year, or you bought a property, etc.
- Calculate your investment performance – Evaluate the return on each of your mutual funds, stocks, or bonds.
- Calculate your debts – Has your credit card debt decreased this year? If not, what happened? Rewrite and Review your plan if required. Keep in mind that paying off your balance due should be one of your top goals.
- Reduce your income taxes - Examine what deductions are permissible to see what you can deduct. Many people have deduction options available, but they do not take them. Search for alternatives to take complete benefit of your deductions.
- Evaluate your retirement plans - Are you saving enough money to meet your retirement goals? If not, then you should work toward your retirement plans during this next year. Ensure that the investments in your IRA (Individual Retirement Account) are working as required.