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How to do a financial health check

  • June 29 2021
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How to do a financial health check

By Zarah Mae Torrazo
June 29 2021

Are your finances healthy? Here’s our guide on how to do a financial health check to make sure you’re on the right track towards your goals.

financial health check

How to do a financial health check

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  • June 29 2021
  • Share

Are your finances healthy? Here’s our guide on how to do a financial health check to make sure you’re on the right track towards your goals.

financial health check

Nowadays, being physically fit seems to be everyone’s top priority. We go to great lengths to make sure that our bodies are in tip-top shape, inside and out. We do workouts, go on diets and get physical check-ups once in a while to make sure we look good – and feel good! 

But have you taken the time recently to check if your finances are healthy? If not, a financial health check should be on your to-do list. Like getting a check-up for your physical health, you need to regularly perform a financial health check to keep your finances in its best shape. 

 A financial health check is a brief evaluation of your financial situation to determine your capacity to reach your financial goals and preparedness for unexpected financial events. It is a great way to set things in order, regroup and look back to make sure your finances are on track. It will also help you to adjust your strategy for the months ahead. 

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Now you’re probably thinking, “This looks a little time-consuming, and I’m not sure where to start”. But performing a financial health check can be done in a few minutes, and we promise it can be quicker than waiting at a doctor’s office. Here’s our basic guide to get you started. 

Step 1: Identify or re-evaluate your financial goals 

When you apply for membership at a new gym, they usually have the same question: What is your goal? Usually, the answer is to have six-pack abs or to be at a certain weight that you think you will be happy with. 

This also applies when you’re looking to attain financial fitness; you need to have an end-goal to have the proper strategy to reach it. Are you planning for an early retirement? Do you want to pay off all your debt (credit card debt, personal loans, mortgage etc) within a certain period? If you don’t have your goals set yet, a financial health check may help you to jumpstart your financial fitness journey. 

If you already have goals, this check-in may help you to realign your financial priorities. Have you recently gotten married? Did you and your spouse have a baby? Do you have changes or events in your personal life that made you realise you need to get started on your estate planning? 

Getting back to the basics and having your goals in line is the first step in performing a thorough financial check-up.

 Step 2: Evaluate your financial situation 

Having a deep understanding of where you currently stand with your finances is an important step in a financial health check. Not only will it let you know how far or near you are from your goals, it also will help you to determine your financially weak areas. 

So, what questions should you be asking yourself? Here are just basic examples of the questions you could ask yourself: 

  • What is my total income? 
  • Does my income meet my living costs?
  • Do I have an appropriate long-term financial plan? 
  • What is my current debt level? 
  • Do I have an emergency fund?
  • Do my insurances cover me comprehensively for most foreseeable circumstances? 
  • Is my superannuation contribution enough to attain my retirement goals? 
  • Is my current budget working out for me? 
  • What does my latest credit report show? 

These are only some of the questions you can ask, but the main aspects you can focus on are your income, expenses and your debt. You can add categories if needed. For example, you may have investment plans or you are creating your estate plan. 

Having a clear picture of your financial situation will help you determine which areas need the most attention and consequently will help you prioritise accordingly. It may be difficult to get down to the nitty-gritty details of your finances, but this key step will help you to reach your financial goals. 

Step 3: Make the necessary adjustments 

When you’ve determined the problem areas in your finances, it's back to the drawing board.

Now that you had a fresh look at your financial goals and you saw how you’re positioned financially, it’s time to adjust your strategy to attain these goals. This can involve creating a new budget, boosting your income, increasing your super contributions or consolidating your debt. 

For example, you’ve determined that your current insurance policies do not give you enough coverage for incidents that may occur. Having the right insurance policies is vital to protecting your assets. You can call up your agent to be sure you understand what your insurance covers and doesn’t cover. From that point, you can take appropriate actions to get better coverage. 

Another example is that you checked your credit score and determined that it will be difficult for you to get a good deal for a home with your current rating. While the situation is not favourable, it can motivate you to start taking steps to improve your credit score.  

If you’re not sure on how to proceed and you want to get everything in order, getting financial advice might be the right move for you. In that case, make sure to read our tips on how to choose a good financial adviser.   

Step 4: Be accountable

No plan has any chance of being successful if you don’t follow through. If you find that your problem area is your cash outflow, keep tracking your expenses to make sure that you’re not overspending. If you’re in a debt cycle of payday loans, you should take steps to prevent yourself from running back to payday lenders as a last resort, such as building up an emergency fund. 

You should consider getting an accountability partner or partners to help you achieve your goals. These are usually people that you share your goals with. It can be your spouse or your immediate family, or it could be people that have accomplished something that you are trying to achieve. 

Their main task is to keep you motivated and on track (and vice versa) when you’ve fallen from the wagon or you feel like giving up. But don’t feel bad during these moments of weakness, because these things happen!

Step 5: Regularly do financial health checks

Now that you’ve learned the basic steps, there’s no excuse for putting off your financial health checks! Set an alarm on your calendar to review your finances on specific dates or months. You can do your check-ins monthly, quarterly or annually.

Aside from these periods, you should do a financial health check when something in your life changes, such as your salary, your housing situation or your debt increases. 

These will help you keep you aware of where you are financially and save you precious time in attaining your goals. 

Conclusion

Your financial health is important, just like your physical health. Doing a financial wellness check can help you determine what adjustments you need to make in your life. Our finances can make or break us in many cases, so having an awareness of where we stand financially is critical.

These are just some of the quick steps you can take to get a bird’s eye view of your financial health. It’ll give you the baseline of where you’re at. If you’re interested to learn further, explore nestegg to read as much as you can about different areas of your financial life – such as investing, saving, budgeting and more! 

How to do a financial health check
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