Financial Check Up

In the most straightforward terms, we can evaluate our finances – including a household budget – by comparing what we planned to spend (or what we budgeted for) to what we actually spent. But there’s more to consider, of course, than just what’s coming in and going out. To get a full picture, it’s important to check in on other aspects of our financial lives to ensure our emergency funds and retirement savings are headed in the right direction and that we have enough life insurance and other protections to weather any of life’s unexpected storms.

Here are some of the key points to consider when reviewing your finances:

Monthly Expenses

Quite simply, you need to make sure that you earn more than you spend. If you find yourself struggling to make it to the end of a pay period, it’s time to sit down and see where your money is going. As you review your checking account statement and credit card bills, look to see where you can make adjustments. One common pain point is ordering takeout and restaurant dining, which has become even more expensive in recent years with soaring inflation. Another place you may be able to cut back is on your streaming subscriptions. The Consumer Financial Protection Bureau offers a budget template calendar along with spending and savings trackers to help you get started.

Emergency Fund

Our lives can take twists and turns we never see coming, from major illness to divorce to job loss. That’s why it’s so important to make sure you have three to six months’ worth of living expenses tucked away in a savings account so you have a built-in buffer if something unexpected happens. And yes, it can be easier said than done. One way to get a jump start on building an emergency fund – or a rainy day account – is to use your tax refund to get it started.

Some people start a side hustle and pour that income into a savings account. You can also take your next raise, or bonus, and funnel that extra money into a separate account. And when it comes to how much you need, there is some wiggle room. Someone who is single with no children or others to support can probably get away with saving a little less (on the three to four months side) compared to someone solely supporting a family of four or more who needs to have a full six months in their emergency stash.

Pro-tip: Once you save enough to create a cushion, get to work paying off any high-interest debt.

Retirement Savings

None of us are getting any younger and many of us may live much longer than we ever expected. That’s why it’s vital to intentionally plan for our futures by saving for the years ahead. A good rule of thumb is to aim to save 15 to 20% of your monthly salary for retirement, which includes any employee contributions through 401(K)s or other plans. The folks at AARP have a retirement calculator you can use to get an idea of where you stand. And whether you are nearing your golden years or just getting started, check out the Social Security Administration’s website at ssa.gov to create an account and learn more about your estimated benefits.

Pro-tip: If your employer offers a retirement account match, make sure you are putting in enough to grab all the matching dollars you can. Unsure? You can check in with your HR department to find out whether you are investing enough to get the full amount. 

Insurance

If you have children or others who depend on your paycheck, then you need life insurance. Health insurance is also non-negotiable along with disability coverage, especially if it’s offered by your employer. While you often need to supplement employer-sponsored life and disability insurance, it tends to be affordable and typically worth the investment. And when it comes to life insurance, a term life policy often covers the needs of most people. Term life insurance is a policy that ends at a set point in time. It includes a death benefit, with no investment attached, and when the term ends, the coverage ends. Term life is usually much less expensive than other options. Many online calculators are available to see how much coverage you should consider at this stage of your life.