Guide to Financial Checkup

financial checkupLike a good spring cleaning, a financial checkup is necessary each year, or even semi-annually.  I have some friends that tinker with and try to optimize their finances all the time, but I find that to be excessive.  However, too much evaluation is better than none.

 

Weekly Checks

Each week, you should review the purchases you have made with your credit card and verify each expense paid from your checking account.  This is to ensure that all of the expenses you incurred are indeed true and accurate.  We hear too often of horror stories when it comes to fraudulent charges or identity theft and how much work it is to clean up that kind of mess.  If you are verifying your purchases on a weekly basis, you will be able to spot unusual charges before they potentially spiral out of control.

 

Monthly Checks

financial-checkupI would encourage you to also look at your billing statements monthly.  Ensure that your TV, Internet, and providers don’t slyly increase your bill.  It’s easy to not take action if you see a bill or two creeping upwards.  However, it never hurts to call the service provider.  Often times that phone call can result in an even lower bill amount.  

 

Additionally, if you do a little bit of research to see what other providers are offering in the area, you can present the representative with a new rate that you would like to pay.  The key is to be pleasant and even smile while you are talking, even though you are on the phone.  Psychology has shown that if you smile when you talk on the phone, that it is reflective in your voice, which will be evident to the other party on the phone.  You can also remind the provider how long you have been a customer and that you would like to continue remaining a customer with them if they will work with you on billing.  Often times, the service provider will do whatever it takes to not lose your business.  

 

If you can’t stand talking on the phone and you are willing to share some of the savings, you can outsource it to BillFixers, who will offer to cut your bill without having you sign a contract if you are willing to share half of your savings.  It’s a win-win if you really hate negotiating and spending extra time on the phone.

 

Yearly Checks

On a yearly basis, certain areas of your finances should also be reviewed.

 

Insurance Policies

financial checkupThis requires yearly checks in order to ensure the proper coverages for your car, home, life insurance and even your umbrella policy.

 

Each year you should make a couple of phone calls to ensure that that you paying a reasonable price for coverage.  By making a couple of calls to some reputable insurance brokerages, you will quickly be able to determine if you could be saving money.  For example, I thought I had the lowest insurance quote for years on my vehicle.  But, since I had become complacent, I did not realize that I could have lowered my insurance my hundreds of a dollar a year if I had switched to another company.  This amounted to over a thousand dollars that I could have saved if I had only made a few phone calls.  Now each year, I ensure that I make these phone calls, and I recently saved a significant amount on my homeowners insurance by doing so.  I don’t know about you, but I think it’s worth it!

 

financial-checkupBudget

Does your budget still make sense?  Are you still saving for a special vacation or can you allocate those dollars elsewhere?  Do you anticipate needing to replace your car soon?

 

When is the last time that you looked at your emergency savings account?  Do you still have the three to six month worth of expenses?  This is the time to ensure that you are still covered in case of an emergency.

 

Estate Planning

Is your will still up-to-date?  Does anything need to be adjusted based on any new circumstances?  Are you still comfortable with the people you have designated as beneficiaries?  Are you still up-to-date with your beneficiaries of your retirement plans and life insurance plans?

 

financial-checkupInvestments

Yes, this is under the “yearly” check and not “monthly”.  I know most people think that if they constantly tinker with their investments, that they will be able to optimize their portfolio.  However, studies have shown that people who actively manage and tinker with their money actually have lower returns.  This is because when it is the perfect time to get back into the market after jumping out, people usually wait too long and miss the massive upswings in the market because they are expecting the market to drop again.  These are the people that buy high and sell low.  I know I sound redundant, but trying to time the market is a fool’s game.  Once your money is in the market, be a long-term investor.

 

Now I’m not saying that you should never look at your investments.  I’m just saying that assessing semi-annually is sufficient.  My father-in-law received some shares of United Health Group many years ago.  He completely forgot about them until he started to receive quarterly dividend checks in the mail.  For the life of him, he couldn’t remember where the shares were held.  Finally, after a year of research, I figured out where the shares resided and had them moved into an account he could receive the dividends as a DRIP.  Over time, these shares have risen over 2600%.  This is one of the top 10 performing stocks of the last 20 years, and he didn’t even remember that he owned it.  This shows you if you own a good company, you really don’t need to tinker.

 

When To Tinker

  1. When one of your positions has grown very large, and you would like to spread out your risk among stocks.  For instance, let’s say you work for Amazon, and when they had their IPO, you received 1,000 shares as an employee.  Over the years if you continue to accumulate shares in the company, Amazon would probably be a very large percentage of your portfolio, and maybe more than you wish.  In order to keep your stock position properly diversified, it may be wise to tinker.  Side note- I wish this was my problem.. Amazon has done fantastically over the years and anybody lucky enough to have shares in it have done extremely well.
  2. When your financial picture has changed due to age.  When you are younger, you can take on more risk.  However, as you get older, you may decide that you would like to become more conservative to maintain your wealth as opposed to grow it.  This is wise if you need the security of a fixed income each year, which bonds provide.  As a younger investor, having a larger percentage of bonds in your portfolio may not make sense given the time horizon that you have before retirement.  As you get older, it may make sense to revisit yearly to ensure that you have the proper asset allocation for your appropriate risk tolerance in conjunction with your age.

 

Hopefully this has been helpful in providing a basic guideline to regularly checking certain financial areas that can be overlooked but are important.  Do you conduct regular financial checkups?  Have you made any drastic changes accordingly?  Share your thoughts below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.

23 Comments

  1. I find that Mint is great for the weekly credit card checks. I can just log in, click over to transactions, and check all of my cards at once.

    Thanks for the tip on BillFixers. Never heard of them, but definitely something I will look into.

    I keep saying that I need to call around on insurance. It’s tough when you only get a bill every six months because it always feels like there is something more pressing to do. I should put a calendar notification to call around before the next bills come in.

    Thanks for a great post!
    Matt @ Optimize Your Life recently posted…How Much Does Happiness Really Cost?My Profile

    • My wife and I saved some big $$$ recently with insurance.

      My wife LOVES Google calendar so she sets an alert six months in the future so it’s super easy so we always know when to make calls.

  2. You know, for the longest of time I thought I didn’t need to keep a tight check on my finances. I just had a general idea I was doing okay, but I’ve realized that’s like heading into the dark with nothing but a small torch to protect you through the night. Your financial condition should be at the tip of your fingers if you wish to alleviate money problems, and this checklist is definitely a good place to get started.

    By the way, your gravatar settings are a bit off…I had to look around for your URL instead of being led to it right through your gravatar.

    • The more and more I read about those that have achieved FIRE the more I see a common theme of financial goals and tight finances. It’s really made me rethink what I’m doing to optimize my finances.

      BTW…thanks for the tip on the gravatar. I think it should be updated now.

  3. That’s quite a nice discovery that your father-in-law made! 2600% is not bad! Like you, I don’t have it in me to evaluate our finances on a daily basis. Your division into weekly, monthly, and annual (semi-annual) checkups is helpful and do-able : )

  4. Yea my bf was going through his credit card bill one time (he only has one CC) and he found out there was a charge for a bodybuilding site. He’s thin but has no interest in being a body builder EVER.

    Anyway called up his bank and they restored his money. Anyway that’s a good example of why people should check their bills.

    • Thanks for sharing Emily. I use to track via a spreadsheet as well. I still have the spreadsheet and it’s fun to look back where you were just a couple of years ago. Thanks for stopping by 🙂

    • I’m totally with you. The long-term stuff is harder. My wife and I use google calendars a lot so it’s easier for us to set a reminder in the future to actually follow through. But that doesn’t always mean that I do 🙁 I need to make some small tweaks to our will and I keep putting it off. I should probably take my own advice and just take care of it.

  5. So good! Our internet bill went up twice in the last year! But one call by Mr. Mt brought it back down. We really need to get new quotes on our insurance. It’s a double edged sword for us. We carry so many policies that we might end up saving a lot, but it’s also lot of work to re-shop all those policies! But beings we pay over $2000 a year, even a 10% savings would be worth switching.
    Ms. Montana recently posted…Protecting Loved Ones from Financial FraudMy Profile

    • Thanks for stopping by. Yes, insurance is one of those hidden costs that seems to add up over time and it can be so worth it to compare prices. Isn’t it amazing that you could potentially make $200 for an hour or two of “work.” Good luck re-shopping your policies.

  6. Great advice. We check our purchases for accuracy on a regular basis and also to make sure there aren’t any recurring charges that need to be canceled. It’s also good to know you don’t recommend tinkering with investments month to month. I often feel like we don’t tinker enough. 🙂
    Kelsey @ Tealmama recently posted…White Chocolate Popcorn Spooky Treat JarsMy Profile

  7. One bit of advice about investment checkups. Consider scheduling your adjustments ahead of time to resist the call of market timing. Also when talking about index funds consider rebalancing with new money contribution s rather then sales to reduce cap gains. Finally do watch your accounts yearly to avoid governments taking your money due to lack of activity (escheatment)
    Full Time Finance recently posted…The Financial Power of PatienceMy Profile

  8. Sweetness… Love it! Of course, I’m the type that can’t stop tinkering with the books. OCD with spreadsheets. I think I have it out with either our insurance broker or accountant depending on the week. Vigilance is the key tag word.

  9. Insurance is one of my biggest expenses, it just adds up: two cars, home, umbrella. I got fed up with my insurance company as they kept raising my rates every six months even though I haven’t had any claims in years and I have been with them for 15 years.

    For the long time I tolerated their rate hikes as I have been with them for a long time and I liked the company. But finally I had enough and I told the insurance agent I am going over to their competitor unless they give me a big discount or lower my rate. It got their attention and reduced my premium by $600 for the year.

    Though, I still feel I am paying higher premium when compared to quotes from other companies and will likely move to different insurance company next year.

    • Good for you for standing up. Too often we become complacent until someone pushes us over the edge. I’m glad to hear that you’re taking a proactive approach. Hopefully that results in further savings down the line for you!!!

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