Mississippi Money: Financial Health Checkup
By Ryder Taff
For years I have gone to the doctor for a regular checkup. I get weighed and get my blood pressure checked, cholesterol and blood sugar levels are taken. My doctor goes through a list of other screens and tests with me before printing out a list that just says “good” next to everything. We chat about my diet and exercise and she gives me a few things to watch out for given my age and other factors.
For most people, an annual checkup is fairly quick and painless, but it is absolutely worth doing. A checkup can catch the early stages of a severe disease, point out a destructive habit or even just give you the peace of mind that everything is fine for another year. Just like a checkup at the doctor’s office, a financial checkup can remind you of the healthy habits you need to be in, prepare you for upcoming changes and uncover hidden risks that you didn’t realize you were taking with your money.
Quickly check your spending, look at your last year’s checking account statements and note the total dollars spent each month. If your spending stays less than your income, you are in good health. Look closely at your highest spending months to see if you need to change any spending habits.
Review your insurance policies for steep premium increases. For your home, auto and health insurance, make a note of what your deductibles are and if your premium has changed. If you carry life insurance, ask if your current coverage is appropriate.
Assess your cash on hand. Add 3-6 months of your more expensive spending months to your insurance deductibles to come up with a reasonable estimate for an emergency fund. If you have that saved already, you’re in good health! If not, make a plan to build that back up to a comfortable level.
Investment needs will vary dramatically from person to person. According to the JP Morgan guide to retirement, a 35 year old with household income of $75,000 should have 1.2 times their income saved for retirement. By age 55 they should have 5.2 times their income saved. The more you make and the older you get, the more you need to have saved.
A checkup is vital to your financial health. This will keep you up to date on your finances and let you know areas you still need to work on. Don’t forget to look at your debts, plan for children’s education, your own career or estate. If the task is daunting or you run into barriers, grab your accountability partner or professional advisor for help!