You’ve probably read or heard a lot about the advisability of a regular medical health check. It can give you peace of mind and help you address any important health issues quickly.
A financial health check can work in much the same way, and you can do a lot of it yourself.
Setting aside some time on a regular basis to understand your financial situation and the steps you can take to improve it could boost your financial health. It can also give you a sense of comfort knowing that everything is in order, and that you have a process in place to identify potential problems.
Here are seven simple steps you can take to give yourself a financial health check.
1. Check your financial plan
As with most things, the best place to start is with a plan.
If you don’t have a financial plan in place, then starting to put one together will help you to focus on your goals and what you’d like to achieve.
If the idea of putting together a financial plan has you thinking of hours in front of a computer screen, rest assured that it doesn’t have to be detailed at the outset.
Just start with a very simple income and expenditure spreadsheet. You’ll find most of the information for that on your bank statement.
This will immediately tell you if your outgoings exceed your income, how much disposable income you have and, if you need to make savings, where you might be able to find these.
A good second step is to ensure all your financial paperwork is in order.
Many of the clients that we’ve recommended this to have reported how much peace of mind they have from all their details being in one place.
2. Cut out unnecessary spending
Your income and expenditure summary will help you ascertain all your regular outgoings.
You can then go through all your mandates and standing orders to check the correct amount is being taken and cancel the ones you don’t need.
Don’t forget to also check monthly debit card deductions. You should be able to find these easily if you bank online, or you can ask your bank for details.
Getting your head around all that will be another big step forward, and you could benefit from saving some money. You may even be due a refund if money has been collected in error.
3. Check your borrowing
There’s nothing intrinsically wrong with borrowing money. Few of us would be living in our own homes without a mortgage.
But part of your financial health check should be to separate your borrowing into “good” and “bad” debt and putting a plan together to reduce the latter.
The interest rate on credit card debt can be high, so it’s worth aiming to eliminate this as quickly as you can. Switching card providers for zero-interest offers can be effective – especially if you treat it as a virtual interest-free loan and pay off the debt during the interest-free period.
It’s also worth reviewing your mortgage arrangements to see if you can switch to a lower interest rate, particularly when you’re near the end of a fixed-term interest rate deal. We would always recommend you speak to a financial expert if you’re thinking of doing this.
4. Review your emergency fund
If you don’t already have one, creating an emergency fund should be a key part of your financial health check.
This is a sum of money – normally between three and six months of your net household income –that’s instantly available and can be used in the event of a domestic emergency, or if your income is affected in any way.
You’ll get valuable peace of mind knowing it’s there and accessible.
If you already have such a fund in place, check it’s still the right amount and top it up if necessary.
5. Ensure your loved ones are protected
The next item to tick off in your financial health check directly relates to the state of your actual health.
You should review what the financial impact would be on your loved ones if you were unable to provide for them. Your emergency fund could cover any short-term hiatus, but what about the longer-term?
It’s likely you’ll take out insurance policies for many things in your life but insuring your ability to earn money – one of the most valuable things you possess – is often overlooked.
There are a range of different policies you can take out to protect your family should the worst happen. Again, we’d strongly recommend you speak to an expert to ensure you have the right protection.
If you already have cover in place, they can help you check it’s still suitable.
6. Check your super funds
All the steps so far have been related to the present day, but part of your financial health check should be about your future.
It’s very likely that the bulk of the money you’ll live on after you stop work will come from your Superannuation fund. So, it’s wise to keep track of this to ensure you’re on course to be able to enjoy the retirement you’ve planned.
If you don’t already have one, you should draw up a schedule of all your super funds, including the current value and projected value at your planned retirement age.
Also, don’t forget to include in your schedule, details of any UK-based pension funds you have if applicable.
This information will help you ensure you’re on track and give you the opportunity to make changes if, for example, you need to boost the amount you’re saving.
7. Don’t forget your other savings and investments
Alongside your super and other pension arrangements, it’s also worth regularly reviewing your other assets.
As with your super and pensions, you should have a schedule of these, including details of the relevant provider in each case, up-to-date values and how your money is invested.
Part of your check should be to review your investments in detail and ensure that your investment profile is still fit for purpose and relevant to your needs and plans.
Doing this will enable you to stay on track and make any adjustments that are necessary as your circumstances and investment time frames change.
Get in touch
We would always strongly recommend you speak to financial experts regarding some of the issues you read about here, such as superannuation, pensions and income protection. Get in touch if you would benefit from advice.
