A Financial Check-Up to Start the New Year

Financial Checkup

From exercising more to giving up cigarettes, well-meaning New Year’s resolutions typically have a low success rate.

But there is a foolproof way to begin the year on the right foot when it comes to financial resolutions: start with a quick win! A simple but valuable milestone can jumpstart your efforts. And one of the easiest is scheduling a few hours or a day to conduct a five-step financial check-up:

  1. Check credit report
  2. Review assets and liabilities
  3. Update budget (or create one)
  4. Analyze retirement plan
  5. Meet with a financial advisor or planner

Check Credit Report

Checking one’s credit report should be done consistently but at least once per year. There are several companies that offer a free credit report, but perhaps the best way is through AnnualCreditReport.com.  This website is sponsored by the three main credit repositories, Experian, TransUnion and Equifax, as a way to meet their regulatory obligation of providing free annual reports for all Americans.

When reviewing credit reports, keep an eye out for errors. Erroneous entries should be disputed and corrected, especially if they negatively affect credit scores.

Speaking of credit scores, it’s a good idea to also check credit scores for all three credit repositories. Although the actual credit reports may be free, consumers typically have to pay extra to obtain credit scores. But it’s a worthwhile expense, particularly if there are any major investments or purchases planned in the coming year.

Review Assets and Liabilities

The next step is to itemize one’s assets and liabilities. Having an updated credit report means that this task is almost halfway completed, as it will indicate the current balance on reported accounts.

This simple exercise can be completed in a matter of minutes, but it is often an eye-opener for many individuals and families. More importantly, this review of assets and liabilities – along with the credit report – will help lay the groundwork for tackling the budget.

Update Budget (or Prepare One)

Updating or preparing a budget may seem like a tedious task, but it’s an important exercise. There are also several online tools and apps that make budgeting much easier – and effective.

One of the most popular tools available is Mint.com. It allows users to centralize all their credit, loan, checking and savings accounts through the Mint.com dashboard. The site can then help create a budget that allows subscribers to get better control of their spending, save more for the future or build greater financial stability. Best of all, it’s free.

Analyze Retirement Plan

The preceding steps help clarify current financial challenges and opportunities. This next stage is about looking forward and taking initial steps to plan for the long term.

Sadly, many individuals have no retirement plans to analyze. With all the free apps, resources and tools available online, there’s no excuse for this. And the New Year is the perfect time to remedy this situation.

Retirement planning really comes down to two basic questions that individuals and couples must ask themselves:

  • How much do I need set aside for retirement?
  • How much time will I need (or have) to get there?

Various retirement planning websites, including most large banks, have apps and tools that can help provide answers to the above question. Many large companies also provide similar retirement planning tools to their employees, through their benefits provider. These apps will not always provide the same results, so it helps to compare a few apps. It only takes a few minutes, but those answers will clarify what needs to be done.

Meet with a Financial Advisor or Planner

The first of the year is an ideal time to visit with a financial planner to start planning for a more worry-free retirement. In addition to independent financial advisors and planners, many large banks now also offer advisory services for their customers. Best of all, these initial consultations are free.

This New Year financial check-up may take a few hours or an entire Saturday. But this investment of time will make it easier to adjust for financial missteps in the past, prepare for future bumps in the road and look at retirement with more confidence.