Are you considering a financial health check? This is an effective way to make sure your financial goals and plans are on track, no matter what’s around the corner. Just like you visit the doctor for an annual physical, you should also perform your own DIY financial health check.
Whether you’re saving for a home, paying down debt, or trying to end the paycheque to paycheque cycle, this is one of the best financial habits to start. Better yet, you don’t need any complicated software or technical skills to get started. In this guide, we’ll walk you through how to do your own DIY financial health check.
1. Clarify Your Goals
To begin, create clear goals for your finances. If you don’t know what you’re trying to accomplish, you’re not going to get very far. When creating goals, make sure they’re SMART (specific, measurable, attainable, relevant, and time-specific). When you know what you want to accomplish, you can create attainable steps to get there.
Your goals will depend on your specific financial situation. Some ideas are:
- Save for an upcoming holiday
- Pay down your debt
- Build an emergency fund
- Plan for a wedding or home purchase
- Invest to grow your wealth
- Build your retirement savings
Now that you have clear goals, you’re ready to continue your DIY financial health check. Keep these in mind for all of the steps below.
2. Track Your Current Budget
Next, we have to do a bit of heavy lifting. This step is often the most intimidating, but it doesn’t have to be. Healing your relationship with money starts with knowing where you’re at today—even if the reality surprises you.
Make a clear list of your current expenses, income, and debt. You can use a money management app to streamline this, or just keep track using your own account statements. When you face your finances as they currently are, there’s no more ignorance or hiding. Better yet, you’re prepared mentally to take steps forward.
3. Adjust Your Budget
After you write down your current budget, income, and expenses, it’s time to adjust. Now that you know where your money is really going, you can audit what’s working and what needs to change. You should always do your best to live below your means, having some funds each month to put towards your debt or your savings.
Reviewing your budget regularly is a must as part of a healthy DIY financial health check-in. Budgeting takes real practice. You won’t be perfect right away, and it’s okay to take your time through this process. As you get more familiar with your spending habits, you’ll learn how to refine your budget.
4. Build an Emergency Fund
No matter what goals you created in the first step, you need to make an emergency fund first. This should be at least $500 that’s set aside in a safe space. In a perfect world, you would put several months of expenses aside. This is money designed for emergencies, like losing your job, car repairs, etc.
Why do you need an emergency fund? Without it, you’re stuck using credit or payday loans to cover unexpected costs. We can’t predict the future, but we can choose to be proactive. When you have an emergency fund, you don’t have to worry about the unexpected destroying your budget.
5. Check Your Credit
Do you know the last time you checked your credit rating? In Australia, your credit rating is used whenever you’re applying for a line of credit, mortgage, and so on. It’s an important way to demonstrate to financial institutions that you’re a secure investment.
If you want access to better interest rates and approval rates, you need to make sure your credit is in good standing. It’s easy to check your credit score for free, and this is something you should do regularly.
6. Stay Accountable
Lastly, the final step in your DIY financial health check is to stay accountable. You know how to complete a financial health check up on your own, but you need to take the time to actually do it. This is far from one-and-done. Your financial health changes all the time, and you should continue to look into your current progress.
When in doubt, ask others to keep you accountable. Recruit a friend or family member to help you with your own savings and accountability. Be open about your financial goals and needs. Not only are others likely to relate, but they can help you stay on track into the future.
Accomplish Your Financial Goals
Remember, you’re not alone when it comes to your financial goals. The entire team here at Debt Busters can help you each step of the way, whether you’re just getting started saving or you’re a seasoned budgeter. Your financial health check is a great first step, but it shouldn’t be your only step.
Ready to accomplish more this year and beyond? Contact a member of our team today on 1300 368 322 for a free consultation. Together, our pros will take your financial plans to the next level.