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Posted by Pat Raskob

How to do a Financial Checkup

How to do a Financial Checkup

Financial freedom is everyone's dream, and a journey everyone needs to take. And the fastest way to stay up-to-date is by doing a financial checkup. It is easy to face bankruptcy without a financial plan. The plan is what leads you to a successful financial year. If you're facing a dip in your financial health, getting back on your feet is easy with a financial checkup. 

What is a Financial Checkup?

A financial review or checkup is taking a census of your personal finances, such as budget, debts, retirement contributions, and so on. Having at least a yearly checkup is recommended to reevaluate your goals.  

Here are simple tips with which you can do a financial checkup:

1. Identify Your Goals

Identifying your goals is the first step to financial freedom. There are a few questions to answer to determine your track, such as 

  • Have you made any progress this year?

  • Have you made losses?

  • Do you know where you're lacking?

  • Do you have new goals?

The next step is to figure out your new money goals. For example, you may add an extra $1,000 as an emergency fund or deposit a maximum 401(k) balance. Then, establish achievable goals and break down the steps to reaching the goals. 

2. Understand where you currently stand financially

Evaluate the current financial status and your future financial plans. The evaluation may involve removing some desires if needed to move forward. Start by calculating your current expenses, debt, and income to find out what you need to avoid. 

3. Protect Your Assets

You also need to establish ways to protect your assets. Know that there is no financial checkup without ways to protect financial health. You can start with homeowner or renter's, health, or auto insurance. Above all, remember to protect your income-earning ability by fortifying it with long-term disability insurance.

4. Make adjustment and review of your budget

Once you know your assets' direction, you can adjust spending to maintain a low impact on income. Such a bargain will create space for other things like paying debt and saving. Ensure you revisit your budget for a good financial checkup.

Budgeting is easy, but the hard part is implementing it. Therefore, it is best to plan your monthly budget before the month ends to help you maintain the proper arrangement of things like monthly payments. 

5. Evaluate Your Investment Performance

Keep checking with your investment portfolios like bonds, stocks, or mutual funds. Evaluate their performance with others in the market. It may be best to sell if you doubt your investment or foresee losses. Knowing your losses will help you offset capital gains by displaying losses from underperforming investments. The method works better with taxable brokerage accounts, not 401(k) or IRA accounts. 

6. Evaluate Your Debts

Debts are financial devourers and need to be kept in check. Managing debt can be challenging but evaluating the debt-to-income ratio can help avoid some errors. For example, your financial health is at risk if you make income and pay it on credit card debts. In addition, consider your mortgage interest ratio to decide if you need to refinance but ensure the closing costs are worthwhile. Also, check your credit score to maintain clear and error-free records while reporting disputes.

7. Reduce Your Income Taxes

Taxes are a burden that needs quick and easy plans. Look for ways to minimize your taxes and possible deductions and use the itemization method. The deduction is an easy way to make an extra penny, but you must be qualified. You can get a decision to file tax-deductible items to reach the threshold for deduction. 

For example, you are allowed to deduct medical expenses above 7.5%. However, if you're close to the threshold, consider paying an orthodontist bill or scheduling an elective surgery before the year ends to save money on taxes.



Pat Raskob
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