7 Point Financial Health Checkup

As I enter my 40’s I am thinking about health more than I did in my 20’s and 30’s. Seems like an important decade to do things right. I don’t have any major issues, but I am thinking a little more about my health now. Therefore I plan on having a physical each year. Seems like a good idea to check in, have the tests run and make sure the numbers are tracking. Same holds true for my finances. I decided to do a 7 point financial “health” checkup and make sure various aspects are on track for growth and success, and to ensure we are well protected in case of emergency. Here are the areas I am looking at:

1. Emergency Fund

As you may know from reading the blog, this is an area I got caught flat footed this summer. I had some money in the emergency fund, but then in the hottest part of the summer my 35 year old HVAC system totally failed! Thousands of dollars later I had a nice new HVAC system, but the emergency fund was depleted pretty bad. I am making this a focus area over the next year.

2. Investment Balance & Allocations

Are your investment balances at the right level compared with your age? Is some catching up required? Are you allocated across asset classes and sectors that match your risk tolerance and age? A person that is 30 will have different goals and time than someone that is 90. Some people are more comfortable with downside risk. If the market lost 20% of its value tmrw would you care? I personally like the Ray Dalio “all weather” portfolio as a general guide or use of a good old fashioned Vanguard Index Stock Fund and Bond Fund. Maybe it is time to see a fiduciary financial professional that can help you ensure you are balanced.

3. Increased Savings/Contributions

Am I saving and investing enough? Are there areas of the budget I could trim in order to plow more into investment vehicles? Under this tab is a re-assessment of lifestyle inflation. Am I living too high on the hog just because I can? Want a million by the age of 65, check out about how much a person should invest: 25 year old should save $109/month to become a millionaire by 65 35 year old should save $345/month to become a millionaire by 65 45 year old should save$1,157/month ”       ”       ”      ”       ”     ”

4. Living Trust, Insurance, etc.

These are those parts of personal finance that no one wants to think about. It is boring and it deals with one’s own mortality. I have to say though, having these things in place makes my living part of life better because I feel more at ease. I am not lying in bed at night worried about what if scenarios. If something bad happened, I know my loved ones would be taken care of and my affairs are in order. This increased peace of mind is a huge reason and motivation to get the living trust and insurance aspects of your finances in order and behind you. And once many of these things are done and set up, you do not need to think about them anymore, Thank God!

5. Saving for something fun?

Life is not all spreadsheets and big FI goals, life also needs some medium term fun goals. Am I saving for something like this? The answer is yes, I am thinking about the next family trip and going somewhere fun for a week. We will still be thrifty, but it is a great world out there and fun to explore!

6. Credit Score

A free credit report can be obtained at AnnualCreditReport.com. Again, this is not a fun thing to do, but probably a good idea to keep tabs of that figure and ensure it is healthy. I use it as a gauge of acceptable levels of debt. If your debt is too high or are missing payments, the credit score could be a good indicator that is is time to get your financial health back on track. Also, as interest rates continue to rise the cost of future borrowing will rise, especially for those with bad credit scores.

7. Taxes

Perhaps now is a good time to make sure receipts and relevant tax documents are organized in one place. It may also be a good time to review recommendations your tax consultant made last year and make sure you are on track. Are you saving enough in tax advantaged accounts like Roth IRAs, etc? Just as it is important to get a health check up each year, the same holds true for your money, investments and resources!  
  • None of this information should be construed as investment or financial planning advice for any individual. Consult a fiduciary financial planning professional with specific questions or for advice.

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