Table of Contents
1. Update Your Net Worth Statement
Your entire life’s worth of financial decisions is reflected in a net worth statement. That may sound dramatic, but it’s the truth. Additionally, it’s the most crucial personal finance health checklist to monitor. It’s critical to make a comparison between your current situation and your past accomplishments as well as your future aspirations. Observing your growth throughout time can inspire you to accomplish your objectives.
In the personal finance health checklist, monitor cash and assets that increase in value over time on our net worth statement. Thus, we include all of our bank accounts, our home, our personal finance health checklist spending account, and all of our investments, both in taxable and retirement accounts. Things like cars that lose value over time are not included. We maintain a record of all our debt under liabilities.
2. Review Your Spending In 2020
In the personal finance health checklist, the second thing we do is go over our previous year’s financial expenditures. As previously mentioned, we use Personal Capital, which classifies our expenditures for us. But there are lots of excellent substitutes. Whichever tool you choose, it’s crucial to examine your expenditures over the course of a whole year. It could point to trends that you would overlook when examining a monthly budget.
I assess our spending in three ways. We pose queries like,
· Did we use our money in ways that were consistent with our goals?
· Did we spend too much or too little in other categories?
· Should we make any changes in the upcoming year?
I examine all of the subscription services we have enrolled in as my third point of interest. These services include news sources, credit monitoring, and video streaming. I prefer to make a list of all of our subscriptions and ensure we still want each one once a year. We’ll cancel it if not.
3. Rebalance Your Investment Portfolio
In the personal finance health checklist, rebalancing your portfolio is a terrific idea at the beginning of the new year. It’s possible that many portfolios have deviated significantly from the intended asset mix, especially in light of the crazy ride we experienced in 2020. My tool of choice is a Google Sheets-based, free investment tracking spreadsheet.
It updates stock prices, mutual funds, and exchange-traded funds (ETFs) using Google Finance features. The spreadsheet allows you to enter your intended asset allocation and tracks the deviation of your investments from that allocation.
4. Check Your Investment Expenses
What is the portfolio’s total weighted average cost of all the funds? It’s worth spending a few minutes finding out the answers to these questions if you don’t already know them. This data is automatically pulled in by the free spreadsheet mentioned above. An excellent alternative is the free portfolio tracker offered by Morningstar.
5. Check Your Retirement Contributions
In the personal finance health checklist, it is also a great idea to review your retirement contributions at the beginning of the year. If you aren’t making the most of your employer match, you might want to think about contributing more. You are at least moving in the right direction, even if the increase is minimal.
6. Plan Your Charitable Contributions For 2021
In the personal finance health checklist, schedule our charity contributions during this period as well. At Vanguard, we make use of a donor-advised fund. We therefore schedule both our payments to the charity we support and our donations to that fund. We like to distribute things in August, for example. Some charities have informed us that the summer is the most difficult season financially because most donors don’t give during this period.
7. Simplify Your Finances
Lastly, this is a wonderful moment to streamline your financial situation. Having numerous bank accounts, HSAs, retirement accounts, and financial apps can make money management more challenging. The fact that I utilize multiple budgeting applications on my own makes me feel ashamed. It can get overwhelming, even though I write about personal money, which contributes to some of it.
Make a list of all the tools, accounts, and applications you own. Next, check if you need each item on the list one by one. Investing accounts should be combined when appropriate. Apps you didn’t utilize last year should be deleted. Additionally, simplify your money management procedure in the process. It might even relieve some of the tension that money can occasionally bring.
8. Check Your Credit
Since fraud tends to be on the rise during this time of year, it is especially crucial to keep an eye on your credit history and score. You should usually focus on your credit card debt, personal loans, and interest- or fee-bearing instalment plans for appliances and household debt.
9. Advance Directives
Have you written down any advance orders? Advance directives are legal tools that enable someone to make decisions for you if you are unable to. These address significant problems with quality of life.
1. Durable power of attorney: Appoint a person of your choosing to handle your financial affairs if you are unable to.
2. Healthcare power of attorney: Appoint a representative of your choice to handle your healthcare decisions should you become incapable of doing so.
3. A living will guarantee that if you are or become terminally ill or are placed in a persistent coma, you receive the medical care you desire.
10. Paid Off Credit Card Debts
Have your credit card debts been settled? Other financial decisions are impeded by debt, which is an albatross. Pay off any high-interest debt you may have from credit cards, auto loans, school loans, or other loans as soon as you can. There are undoubtedly better things you could be using your money for than making interest payments. Paying off your credit card each month is preferable to paying the minimal amount required when using one. This builds up credit that is suitable for making large purchases like houses, cars, and other real estate.
