A financial checklist is a great way to monitor you progress along your personal financial journey. To better position yourself for financial success, here’s a checklist of the fundamentals you should work towards to strengthen your financial future.
- Do you have a budget?
Be realistic about making a budget. Track your expenses for at least a month so that you have a clear picture of what you need and don’t need. You can do this with a good old-fashioned notebook and pen, an excel spreadsheet or with the help of a budgeting and savings app. Once you’ve tracked your expenses, create a budget and follow it religiously. If you don’t have a budget yet, start working on one.
- Do you have an emergency fund?
An emergency fund is money you put aside for the unexpected. This money is crucial, especially if you are trying to manage your debt situation, as a lot of the borrowing we end up doing is to cater for unplanned situations. Your emergency fund should have enough money to cover your expenses for at least three to six months. This money will also come in handy in the event of a more serious setback, such as a layoff or an illness that prevents you from working. If you don’t have a sufficient emergency fund in place, start saving towards one.
- What are your short-term, middle-term and long-term goals?
Write down all the financial goals you’d like to achieve within the next 1-year, within 5-years, and within a longer time span (more than a 5-year period). Keep in mind that a financial goal must be Specific, Measurable, Action-oriented, Realistic and Timebound. Having this list of goals will give you a useful overview of where your money should be going and what kind of investments you require to meet these goals. If you haven’t written down your goals yet, give it some thought and create this list.
- What is your debt situation?
Take a step back and review what you owe including your mortgage, student loans, mobile loans, personal loans and other loans. List all your debts including the original principal amount, amounts outstanding, loan term and the interest rate for each loan. You can then come up with a repayment plan. Ideally you should payoff the loans with higher interest rates first (Such as credit card debt and mobile loans), but you may choose a strategy that feels best for you (such as paying off the smaller ones first). Putting money towards freeing yourself of debt is a positive step in the right direction. If you haven’t reviewed your debt recently, begin today.
- What are you short-term, middle-term and long-term investments?
When deciding where to invest, in addition to considering your risk appetite, you also need to consider the investment timeframes. These timeframes need to be in line with your financial goals. So, write down all your current investments and categorize them according to these three timeframes. For example, fixed deposit accounts or money market funds are appropriate short-term investments that can satisfy short-term goals such as building an emergency fund; equity funds or a balanced mutual funds would be appropriate middle to long-term investments that can satisfy a middle-term goal such as paying a deposit for a home; A Pension scheme or real estate would be appropriate investments for a long-term goal such as retirement. Focus on aligning your investment choices to your goals.
- Are you adequately insured?
Life is full of risks and therefore insurance is an essential part of any sound financial plan. You need to ensure you protect what matters to you. That means protecting yourself, your family and your property. So, what insurance covers do you actually need? If you have a car, you should have auto insurance; If you have a home, you should have homeowner’s insurance (You should have domestic cover of you are renting); If you have children or a spouse, it’s a good idea to get life insurance. If you are employed, disability insurance can guarantee that you have a source of income when you’re too sick to work. Ensure you have these basic covers. Additionally, having personal liability insurance is also advisable. Ensure you have these basic covers.
- Are you tracking your Net Worth?
Get in the habit of calculating your Net Worth at least once a year. This is simply the calculation of your assets less your liabilities, and is a great way to track your financial progress. If you have not recently calculated you Net Worth, do so now and identify what areas require improvement.
The beauty of this checklist is that you can follow it as a blueprint of what you could achieve. The goal of this checklist is to give you a structure you can follow. Get checking and start progressing!
If you would like a FREE Financial Wellness Self-Assessment Workbook or a Net Worth calculation template, email me at brenda@thesquare-bracket.com and I will send you the same.