Just like taking care of your physical and mental health, it’s important to keep tabs on your financial health. Monitoring your financial situation can help you better plan for the future and confidently make decisions that benefit you in the long run.
Below are five ways to check in with your financial health.
Analyze your cash flow
The first step in monitoring your financial health is to understand what you’re earning and spending every month. You can start by creating a budget that lists all your monthly income and expenses. With this analysis, you can understand how much you’re saving, see where you’re spending, and identify areas where you may be able to cut back a little.
Track your credit score
It’s important to monitor your credit score since lenders use it to gauge your ability to manage debt. You may be able to access your current credit score for free via your credit card company or bank. Also, every year, you can get a free credit report from each of the three main credit bureaus—that’s three free credit reports per year.
Review your credit report for any inconsistencies or signs of fraud. If you see anything wrong, report it through the proper channels.
Review your savings and investments
Savings and investments can be vital for both short- and long-term financial stability. Review your savings accounts, emergency fund, and retirement plans to see if you’re on track to meet your goals. You can also review any other investments, such as stocks or mutual funds. It can help to meet with a financial advisor to discuss all these things and ensure your savings and investments are on track.
Check your debts
It’s important to regularly review outstanding debts, such as credit card balances, student loans, mortgages, or personal loans. Take some time to figure out how you might be able to strategize paying debt off more efficiently. You don’t need to put all your extra income toward paying down debt, but it can help to ask yourself some important questions. Where are you in paying these off? How do they fit into your budget? Are there any high-interest debts that you might be able to pay off more quickly, thereby saving money in the long term? Is there a way you can streamline payments, such as through automatic transfers from your bank?
Evaluate your insurance coverage
Review your insurance policies, including health insurance, life insurance, home insurance, and auto insurance, to assess whether your coverage is adequate and up to date.
Consider changes in your circumstances that may require adjustments to your coverage, such as a new job, increase in income, or upcoming marriage. For example, if you’re about to get married, it may be time to add your partner to your health insurance. Or, if you recently got a big raise, it might make sense to get a permanent life insurance policy, like whole life insurance, with coverage that lasts a lifetime and a cash value component.