Annual Financial Checkup and Maintenance List: An 8-Step Guide

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It’s a smart idea to conduct an in-depth analysis of your personal finances on an annual basis. It doesn’t matter whether you do this at the beginning of the year, the end of the year or somewhere in between. What matters is that you do it.

Many people live kind of a Groundhog Day life when it comes to their personal finances: They repeat the same steps over and over and then get frustrated when they get the same dismal results.

When you commit to performing an annual checkup on your finances, you can take steps to change things for the better.

In this article, I’ll detail what an annual financial checkup and maintenance list looks like and how it can help you improve your financial life.

Annual Financial To-Do List Items

There are many items you can add to your annual financial checkup and maintenance list. I’m going to share the eight things I consider to be the most important if you want to improve your financial situation or maintain the great results you’ve already had.

Table of Contents: Annual Financial Checklist

  1. Evaluate And Make a Plan for Your Financial Goals
  2. Analyze (or Create) Your Budget
  3. Look at Your Debt Numbers
  4. Assess Your Retirement Numbers
  5. Analyze Your Emergency Fund
  6. Evaluate Investment Performance
  7. Review Your Tax Situation
  8. Assess Insurance Coverage

1. Evaluate and Make a Plan for Your Financial Goals

When it comes to maintaining your finances, it’s important to evaluate your goals. If you don’t have any, now is the perfect time to create some.

What is it that you want to get from the money you work so hard to earn? To pay off your debt? To be financially independent? Ensure you have enough money to retire?

Money expert Clark Howard’s goal has always been to help you to take control of your finances to help improve your life financially and otherwise.

One of the ways he does that is by teaching you and other readers how to set goals that you can actually achieve. Do you have written financial goals? Are you taking steps to achieve those goals? Are the goals actually achievable?

Start by evaluating your goals to see if they are “SMART” goals:

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  • Specific
  • Measurable
  • Achievable
  • Relevant (Reasonable, Realistic)
  • Time-Based (or Time-Bound)

For instance, if you make $200,000 per year, an achievable goal could be to save 50% of your income. However, if you make $70,000 a year and are supporting a spouse and two kids, you may need to drop that number to 10% or 20% of your income.

Choose your financial goals based on your wants, your needs and your current financial situation.

Then make a plan in your budget for achieving those goals using the SMART system. We’ll talk about that next.

2. Analyze (or Create) Your Budget

Do you create a written budget each month? If so, are you using that budget to manage your finances? While using a budget may seem restrictive, I’ve found that budgets are actually quite freeing.

A budget gives you control over your money: control to use your money in ways that align with your financial goals and dreams.

One way to create an easy-to-use budget is to use a zero-based budget. A zero-based budget simply means you give every dollar you earn a specific purpose.

When you create a zero-based budget, you won’t have any money left over at the end of the month because any “leftover” money will get assigned to a spending (or saving) category of your choice.

If you’re already using a budget, it’s important to do an annual checkup to see if your current budget still works for you:

  • Is it helping you achieve your financial goals?
  • Are you staying within your allotted dollar amounts when you spend in categories such as grocery, entertainment, clothing and personal care?

If not, you’ll want to rework your budget so it aligns with how you’re truly spending your money. Or you’ll want to rein in your spending to get your budget back in line.

When assessing your budget, be sure that you’re including line items that help you reach whatever financial goals you’ve created.

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Here are some great budgeting tools you can use to help create a budget that works for you.

3. Look at Your Debt Numbers

Now it’s time to assess your debt numbers. Gather your latest monthly statements for debts you have: mortgage, student loans, credit cards, auto loans or other debts.

How much debt do you have? Is your debt number higher or lower than it was last year? Are you OK with the amount of debt you’re carrying?

Clark is a big believer in setting a goal to pay off consumer debt in three years or less:

“My philosophy is to get that credit card debt paid off in three years or less, because that’s a time period that people can see great progress pretty quickly. Every month you’re going to see more and more of the money going toward principal while maintaining the same payment,” Clark says.

“I find when people set a five-year goal they tend to fall off the wagon. If they’ll plan for three years or less and stick to it, they’ve got a decent shot of getting it done.”

Paying off your consumer debt will feel like a weight has been lifted off of your chest. And consider making a plan to tackle your mortgage debt after you’ve paid off your consumer debt. The less money you’re spending on debt payments, the more cash you have to save and invest.

4. Assess Your Retirement Numbers

Many people don’t save — or save enough — for retirement because it:

  • Seems so far away
  • Feels like such a daunting task

When it comes to saving for retirement, Clark likes to use a baseball analogy. The single hits you get as a batter are much more important than sporadic efforts to get a grand slam. A grand slam is rare in the baseball world. A single is an everyday occurrence.

The singles get little attention, they’re what add up to great player performance.

Saving for retirement works the same way. Start by building the habit of saving 1% of your income for retirement. Then move up to saving 2%.

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Take baby steps over a long period of time instead of starting at a higher number that you may not be able to sustain. Reach your retirement and other financial goals by creating good habits in your life one small step at a time.

5. Analyze Your Emergency Fund

One of Clark’s very first financial goals was to establish an emergency savings account. While working as a young adult in his early twenties, Clark resolved to begin living on just half of his paycheck.

He had learned from his parents that not saving money could have a hugely negative impact on your life. And Clark credits his decision for choosing to save half of his pay at such a young age for catapulting his financial situation to a great place.

It was that savings account that helped Clark purchase his first investment property.

Experts say that your emergency fund should be equal to three to six months’ worth of expenses. Set a goal of how much you want to hold in your emergency fund. Then set up an automatic transfer into your savings account each month that will help you reach your goal.

6. Evaluate Investment Performance

Do you evaluate the performance of your investment accounts each year? Are you documenting your annual profits and/or losses and rebalancing your portfolios if need be?

This step should apply to both retirement and non-retirement investment accounts. Although “buy and hold” is good investment advice as a whole, it’s important to keep track of the performance of all of your investments.

If you’ve got one that seems to be performing below expectations year after year, it may be time to switch gears.

Analyzing your investments is especially important when it comes to keeping track of what you’re paying in fees. As Clark says, investment fees can cost you tens of thousands of dollars over the lifetime of an investment.

So as you’re evaluating the performance of your investments, be sure you’re paying the lowest possible fees by doing business with the best investment companies.

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7. Review Your Tax Situation

Another annual financial maintenance step is analyzing your tax situation. If your tax situation is a bit complicated, sit down with a trusted tax advisor and dissect your tax return. Work to answer questions such as:

  • Am I taking advantage of all deductions available to me?
  • Are there additional tax breaks I could be utilizing?
  • Do I need to reassess the filing status I’m using?

For instance, maybe you could be putting more money in your 401k or contributing to an IRA or Health Savings Plan. What about reducing your taxable income by gifting money to your kids or contributing to a grandchild’s 529 plan.

Talk with your tax specialist about steps you can take to lower your tax burden and keep more money in your pocket.

8. Assess Insurance Coverage

Do you carry sufficient life insurance to care for your family if you died prematurely?

Is your health insurance plan the right one for your situation? Do you have — or should you get — dental or vision insurance? Have you shopped around to get the lowest rates on your homeowners and auto insurance?

Should you trade in your homeowners insurance policy for an umbrella policy? As you analyze all areas of insurance coverage in your life, work to make sure that you:

  • Have all of the coverage you need
  • Are paying the best rates for each type of coverage

Insurance benefits and coverages change regularly. Be sure you assess your coverage on an annual basis so that you have the right coverage if and when you need it.

Final Thought

Performing an annual checkup on your personal finances is a great way to ensure you’re managing your money in a way that will provide you with the highest profits and the fewest financial headaches.

Make your annual financial maintenance checkup an event you never miss.

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