What is a financial check-up, and why do you need it?

You should also have a closer look at your personal finances if you’ve gone through a major life event (such as a marriage, divorce, birth or death) as your circumstances, outlook and capabilities might’ve shifted.

What is a financial check-up?

A financial check-up is a way to assess your financial health by thoroughly reviewing and checking your ‘financial vital signs’, such as:

• What is the state of your budget and expenses?
• What is your debt situation?  
• Where are you with your retirement and emergency savings?
• Are you on track to meet your financial goals (e.g. planning for an education, event, house or savings)?  
• Are you optimally insured (not over or under-insured)?

Your goals or circumstances could’ve changed since you last set your financial planning in place, and therefore, a financial check-up is a crucial step in ensuring you’re on track to meet your financial objectives.

An annual financial check-up helps you evaluate your current financial situation, reviewing your spending habits, savings, debts and investments to help identify areas where you could adjust so you can continue/start making progress towards your goals.

How to do a financial check-up

Step 1: Gather your financial information

This includes your bank statements, credit card statements, investment account statements and any other financial documents but also what your previous financial plan entailed.

Step 2. Take stock of your financial stats

Look at what has been happening in your finances over the last 12 months to get perspective on where your money is heading. Along with the specifics of how much you’re saving, spending, and investing, also consider the following:  

• Were you able to stick to your budget every month? How many times did you overspend and why?
• Were you able to meet all your debt obligations?
• Did your debt increase or decrease?  
• Did you reach or fall short of any of your goals?

Step 3: Factor in your life changes

Has your personal or professional life gone through any changes since your last financial check-up? Life changes can affect your overall financial picture and your plans. For example, changing jobs, getting married/divorced, receiving an inheritance, moving or retiring can change your financial capacity and perspective.

Step 4: Evaluate your budget and spending habits

See whether your budget is working for you by assessing whether your income is keeping up with your expenses and spending. Consider the following in your budget and whether it’s gone up or down:

• Fixed expenses, such as housing, transport and insurance
• Variable expenses (changes every month), such as food and utilities
• The discretionary expenses, your ‘wants’
• Income
• Savings  
• Debt repayments

Step 5: Review your debt

Do you have new debt, or have you gotten rid of some? List your current debts and create a plan to pay them off. Start by paying off high-interest debts first, such as your credit card balance(s). See whether there’s room to renegotiate interest rates or consolidate your debt.

Step 6: Scrutinise your savings and investment strategies

Are your savings and investment strategies still aligned with your long-term financial goals? Determine whether you’re saving enough, whether you could increase your contributions to your retirement and emergency savings and whether your investment portfolio is optimally diversified to mitigate risk.

Step 7: Adjust and implement changes

Based on your evaluation, make the necessary adjustments to your budget, planning or lifestyle accordingly so that your revised financial plan is aligned with your circumstances and helps you achieve your financial objectives.

_{Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).}

_{Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.}