Did you know that 48% of adults admit that they feel stressed or overwhelmed about their financial situation at times?
Similar to a dental check-up or a medical check-up, a financial health check is important as it helps evaluate how you are managing your money.
Previously, this would be done with a financial professional however nowadays, there are several tools available online. For example the financial health check tool by the Money Advice Service.
Why should I take a financial health check?
It gives you a clear picture of where you are at with your finances.
By understanding your financial position, you will be able to find ways of improving your financial health. This in turn will help with your overall well-being.
Here is how you can conduct an effective financial check-up:
1. Identify your financial goals.
Whether these are long-term or short-term goals, creating specific goals is the first step to perform a thorough financial health check. You can use online tools to help you such as the MoneySkills App.
2. Understand where you currently are with your finances.
This means laying down all your expenses, debts and incomes to help you understand where you are and what areas of your finances need the most attention. This will then help you prioritise what you need to do. By understanding where you are with your finances and making any necessary changes can help you reach your financial goals.
3. Track how much you are spending.
This is an important exercise for your financial checkup as it means tracking what your expenses and daily transactions look like. If you haven’t already got a tracker, you can create a spending journal to see where your money is going.
This will help you see how EXACTLY you are spending your money and make you be more conscious of how much is going out from your bank account.
Tracking also helps with cutting your budget.
4. REVIEW your budget.
If you already have a budget, this is your chance to review it and make adjustments. However, if you haven’t got one, you can create one. Here is an online tool to help you.
5. Review your savings for the long term.
Make sure that you start saving for a rainy day. This will help in case there are any unplanned occurrences such as you lose your job; bills are unexpectedly high.
By setting goals of how much you will save each month can help you in case an emergency does happen. You can then use this instead of getting into debt.
One of the ways that you can start saving immediately is by setting up a payroll deduction scheme with your workplace.
6. Check your credit score.
By doing this, you will be able to know what your creditworthiness is. You can use credit score reporting websites to find out.
7. Get accountable.
Share your goals with an accountable partner or partners who are either on the same journey as you or have already accomplished what you are trying to achieve.
By doing this, you will be motivated to keep going and stay on track.
TIP: To ensure that you conduct a financial health check, set reminders on your calendar so that you can review your finances on certain dates. Also, if something in your life changes such as a change of jobs (and salary); a new debt, you would need to do a financial review. By staying on top of your money will help you with your financial well-being.