How to Perform a Financial Check-up
To stay in good physical health, most people get a medical check-up regularly. To keep your finances manageable, they need a regular check-up as well. It’s essential to review your finances if there have been changes to your life in the past year, such as a change in income, marital status, medical emergencies, or if you’ve had a baby.
Suppose you have goals, like saving for a down payment on a house or planning to retire early. In that case, reviewing your financial situation multiple times throughout the year is needed.
Performing a Financial Check-up
Analyze Expenses vs. Income
Create a budget and track your monthly expenses. Are you spending more than you’re earning? Are you using credit cards to support your lifestyle? If your expenses are getting out of control, use a budget to determine where to rein in your spending.
While you’re getting spending under control, consider using cash or debit card for your entertainment expenses or luxuries so you don’t lean on credit.
Review Credit Card Debt
Ideally, you should pay off credit card balances in full each month. If you can’t, try keeping your balance under 30% of your total credit amount. To control your credit card expenses, give yourself a 24-hour rule: if you see something you want to buy, give yourself 24 hours before purchasing it and see if you still need it.
Evaluate Insurance Coverages
If you’re a renter, do you have renter’s insurance? Coverage is usually $250 - $350 annually or can be paid monthly. If your building were to have a fire or your apartment is broken into, this coverage will be well worth the expense. If you don’t have health insurance through your work, consider purchasing a fixed benefit indemnity plan or a short-term medical plan which will cover medical costs in the event of a severe illness or injury.
Build an Emergency Fund
Can you unexpectedly cover a $500 expense without going into debt? If not, consider starting an emergency fund and depositing a specific amount into that account with each paycheck. Start by setting aside at least 1% of each paycheck into a savings account with a goal to save enough to cover 3 to 6 months of household expenses. This might take a year, but you’ll be there before you know it if you automate your savings.
Well-funded emergency savings will provide you with peace of mind in the event of a sudden loss of income or a significant repair bill. If you’re a First Florida Credit Union member, you can easily open a separate savings account online for your emergency fund or visit a local branch for help. We recommend you label your savings “emergency fund” so you’re reminded not to spend this money on anything except emergencies.