Financial Wellness Checkup: Taking Stock of Your Financial Life
As we approach retirement age, it becomes even more crucial to assess our current financial situation and make informed decisions for a financially stable future. In this article, we will explore the key components of a financial wellness checkup.
Assess Your Current Situation
To begin your financial wellness checkup, it is crucial to review your current financial situation.
Follow these steps to gain an understanding of your current financial health:
1. Review Your Income & Expenses:
● Identify your income sources, including salary, investment income, rental income, and other sources.
● Track your expenses over a designated period of time (i.e. monthly, annually), categorizing them into essential living expenses, savings and debt, and discretionary expenses. By doing so, you gain insight into your spending and saving habits.
2. Review Your Spending Plan & Budget:
● Budgeting plays a crucial role in managing your finances effectively. Implement a budgeting approach like the 50-20-30 Budget. This spending plan allocates 50% of your take-home pay to essential living costs, 20% to savings and/or debt, and 30% discretionary wants.
● Regularly track your expenses against this budget to stay accountable towards your financial goals and make adjustments as needed.
Below is an example 50-20-30 budget.
3. Analyze Your Savings and Debt Levels:
● Evaluate your savings accounts, retirement funds, and investment portfolios. Determine if your savings are growing steadily and if you are adequately prepared for emergencies and future goals. Having an emergency cash reserve is crucial to protect yourself from unexpected expenses and financial hardships.
● Assess your debt levels, including credit card balances, loans, and mortgages. Calculate your debt-to-income ratio to understand how much of your income is dedicated to debt payments.
4. Evaluate Your Financial Goals and Progress:
● Reflect on your short-term and long-term financial goals. Are you on track to achieve them?
● Measure your progress by comparing your current financial status to the milestones you set for yourself.
● Assess your insurance needs to safeguard yourself and your loved ones.
By following these steps, you will gain a comprehensive understanding of your current financial situation, the foundation of financial wellness. Remember, the goal of financial planning is not perfection but progress.
Seek Professional Help: The Role of Financial Advisors
While navigating investing and retirement can be challenging, you don't have to do it alone.
Seek assistance from a reputable financial advisor who can optimize your financial plan and decision-making process. When choosing a financial advisor, consider their credentials, experience, and fiduciary duty to act in your best interests. Financial advisors can provide tailored guidance on investment strategies, retirement planning, tax optimization, and risk management, ensuring accountability and objective advice.
At Sensible, we help our clients with all aspects of retirement planning. Schedule a free consultation to learn more about our financial planning services.
Financial Planning is Ongoing
Conducting a financial wellness checkup is a crucial step toward achieving your financial goals, and it’s an ongoing process. Regularly review and adjust your financial plan, accounting for changes in your life.
Remember, your financial journey is unique, and it's never too late to improve your financial life. Start today, and embrace the opportunities that lie ahead.
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