8 Ways to Check and/or Protect your Financial Health

Many of us see the doctor for an annual check-up.

Probably, even more of us have our car checked on a routine basis.

Few of us take a holistic view of our financial health, particularly, on a routine basis.

I encourage you to be an early adopter, change this, and become proactive with your financial health.

For our physical health, our doctor might check our weight, blood pressure/pulse, LDL/HDL and then compares the findings to our initial baseline results.

For our financial health, we should also establish a baseline /benchmark and then, periodically compare our results to our previous records,

How are we going to know how we are doing unless we take the time to look?

How are we going to tell if we are getting better if we don’t have an initial baseline to compare to?

The factors that you choose to use are up to you. My list includes possibilities for you to consider. Record your answers & date it. Some responses will result in a number, others will be a yes/no and perhaps initiate a new thought process. Here are my suggestions: 

1. Determine your Personal Net Worth

• Create a Balance Sheet: Assets = Liabilities & Equity
• Assets are the value of what you own; liabilities are what you owe
• Assets – Liabilities = Equity in a business or your personal Net Worth

2. Review the Liability limits on your insurance policies (Homeowners, Renters, Auto, Business). Is the limit high enough to protect your Net Worth if something serious happened? You don’t want to leave your “assets” (money) exposed to risk of loss without making the conscious decision to do so.

3. Cash Flow- Positive or Negative?

• Money coming in, money going out, and when?
• Is it steady through out the year or does it fluctuate?
• Are you spending more than you bring in?

4. Liquidity – Emergency Fund +

• Emergency Fund savings for 3-6 months of living expenses?
• Any other “reserves” you keep – Christmas or vacation fund?

5. Your Personal Savings rate

• Do you try to pay yourself first?
• Are “you” built into your required monthly expenses?
• Do you fully participate in your company’s matching program?

6. Determine your Debt/Income Ratio

• Lenders use this to determine your ability to manage payments
• Total monthly debt payment/monthly gross income
• 43% is generally the maximum for a Qualified Mortgage as per Consumer Finance

7. Review your Retirement Allocations

• Does it make sense?
• Is it balanced?
• Are you earning a return? 

8. Check your credit score – It is your Financial Reputation

• Obtain your free annual credit report from each of the 3 major reporting agencies, check it for accuracy, and dispute anything that is not correct
• Obtain your FICO score

Taking the time to manage our money provides benefits:

• Feeling in control
• Knowing our capacity to absorb financial shocks
• Finding if we are on track to meet our financial goals or
• Having peace of mind and the flexibility to make choices

The road to financial freedom is full of potholes. If you take the time to discover, find, and fix them, your trip will be less eventful and you will reach your destination faster & safer.

May you have a safe, prosperous, and fulfilling journey.

Thanks for the reading!

Deb

P.S. I welcome and encourage comments and questions. It is one way to see how I am doing. 

Deborah Ann Fox, CPA is working to make a difference in peoples lives by helping them build and protect their financial health. She offers free 30 minute, no obligation consultations and is available for appointments – including remote. More information is available at http://www.DeborahFoxCPA.com. Questions or comments can be sent to debfoxfinancial@gmail.com.