Conventional wisdom suggests a visit to the doctor’s office at least once a year. With the dentist, you should go every six months. Babies see pediatricians to make sure they are hitting certain milestones. Even your car requires a regular inspection!
Yet, when it comes to your finances, no framework exists to make sure you are taking regular stock of your financial health.
What is a Financial Health Checkup?
Your initial financial plan should reflect your goals and priorities at a point in time. After that, financial planning and advice should be a fluid, ongoing process. As your family, professional and financial situations change, your plan should adapt to keep up with your changing needs.
Of course, with so many choices available to you (and so much going on in your life), financial planning can quickly become overwhelming. It’s hard enough to know where to start, let alone when you should check in with your banker or financial advisor to finetune your approach.
The Financial Health Checkup is a tool that helps you understand your financial priorities and determine when you should check in with your banker or advisor to review your existing financial plan. For anyone who has not started a financial plan, a financial health checkup is an important first step for effective goal setting.
How a Financial Health Checkup Works
Sticking with the doctor’s visit analogy, you would never make a doctor guess what’s going on with your body. You say, my leg hurts or I’ve been having headaches or whatever it is you want the doctor to help fix. Or, if it’s your annual physical, you might say, you know what not much has changed. I feel just fine. In this case, the doctor might ask a few probing questions and run some tests to make sure everything is in fact just fine.
Just like there are certain times when you should see a doctor, there are certain events in your life that call for a closer look at your financial plan. The Financial Health Checkup is a framework to help identify events in your life that may require an adjustment to your financial plan. Examples of life events that the Financial Health Checkup will help uncover:
- What’s new in your career? Did you change jobs? Get promoted? Start your own business or retire recently? All of these events have the potential to change your income and warrant a check in with your financial team to review your existing plan.
- What’s new with your family? Recently have kids? You may want to start saving for your little one’s education. Plus with more mouths to feed, you should take another look at your budget to make sure your finances stay on track.
- What are you saving for? At a minimum, you should be putting away a portion of your income to save for retirement. Outside of retirement, typical large expenses include saving for a new house or the renovation of an existing home. There are also events like family vacations or weddings, medical bills or vehicle/home repairs that come with hefty price tags. The path to financing these different types of expenses varies so it’s good to let a banking specialist or advisor know when you have these events on the horizon.
Benchmarks and Milestones
While financial planning should be based on individual needs, it’s also important to understand how you stack up against your peers. This is especially true for longer-term goals like retirement. Seeing how you stack up against peers is a good indicator of how well your current savings plan is working. In addition, there are time-tested milestones for retirement savings based on your age and income that can act as a helpful guide and serve as a good rule of thumb.
How Often Should You Take a Financial Health Checkup?
We recommend taking the Financial Health Checkup at least once a year. Of course, if your life is busy and full of change, the Financial Health Checkup is always available as a tool to help you plan. If you don’t have a financial plan, we recommend taking the Financial Health Checkup right away so a financial expert can tailor a plan that’s just right for you!