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Personal Financial Checklist

Here is your financial wellness kit. Some of the question may not apply to you if you don’t have investments. Just skip over the questions that don’t apply. After answering the questions you should be able to formulate a plan of action to improve your financial situation. Just reading through the questions is a big step.

For some of you the first order of business will simply be figuring out what your monthly expenses are and what is the value of your assets. Don’t worry if it takes awhile to do that. The fact that you are taking that step means you are on your way.

1. Is your net worth growing?

Your net worth is basically your assets (your home, stocks, bonds, IRA’s etc.) minue your liabilities (mortgage, credit card debt, car loan etc.). Your net worth will increase if your assets go up i.e. your savings increase, your stocks go up, your home value increases etc. or your debts go down. That is why financial planners and advisors are always talking about paying off debts.

Declines in net worth are not always a bad thing, your assets may be lower because the market went down or you are paying for college or starting a business. Sometimes you just can not help the decline as you may have lost your job or quit working to take of a child or relative.

2. How are your ratios?

Look at your debt-to-income ratio, your savings rate and emergency funds.

Financial planners say younger people should dedicate no more than 30 percent of gross income to pay for all debt (car payments, mortgage, student loans, revolving debts).

As for savings, everyone should aim to save 15 percent of their salaries, while empty-nesters preparing for retirement should try to save 20 to 25 percent. Understandably, you may miss these targets when you are struggling to pay for your children’s college or saving for a home (especially on the coasts) or have a financial disaster like loss of job or serioius illness in the family. Meanwhile, your emergency fund should contain about six months of expenses in cash, while retirees should set aside one year’s worth of fixed expenses.

3. Are you spending more than you earn?

Some people use automated tracking systems like Quicken, Mint.com, Wesabe.com or YouNeedABudget.com. Most people don’t do it though and so they never realize what is going on in terms of spending. Even if you just do it with pencil and paper – you need to find a way to show yourself what your expenses are each month.

4. What has changed in your life in the last year?

Big life events can disrupt even the best strategies. Getting married, having a child or even becoming eligible for Social Security or Medicare will require that you make many financial decisions. You want to ask yourself what has changed in my life that might require me to makes changes in my financial plan.

5. Do you have enough insurance?

Evaluating the costs and amounts of your homeowners’, renters’ and auto insurance policies should be an annual or biannual exercise. Consider raising your deductibles because that can lower your premiums. Make sure you have enough life insurance and if at all possible disability insurance. A good rule of thumb: about 20 times salary for life insurance (for one or both spouses) minus any other resources you may have.

6. Do you need to make any changes to your estate plan?

Are your beneficiaries you have named — on things like your retirement accounts or your life insurance policies — up to date.

Estate planning documents like wills and trusts also need to be reviewed and possibly updated.

Also make sure your advance health care directives and health care proxies or medical powers of attorney are in place.

7. How are you sleeping?

If you have investments are you comfortable with your level? Because the stock market has been so crazy many financial planners say consider asking whether you can meet your goals with fewer risky investments like stocks.

If you are in severe financial distress don’t be embarrassed or afraid to ask for help. It has happened to so many of us and it is nothing to be ashamed of. It is not worth losing sleep and days of your life worrying about it. See our post What are the Pros and Cons of a Debt Reduction Plan

8. Have your outlook or goals changed? Are you happy?

At its core, financial planning is not simply about money. It is about finding the best way to finance what you want out of life.
What could you do to be happier and better off a year from now.

If debt is really getting you down see our postHow To Defeat The Debt Monster