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How To Conduct A Financial Check-up





Are you in control of your finances?

Most people, unless they are well down the road toward bankruptcy, would tend to answer "yes" to this question. Yet it is surprising how quickly control of finances can slip away. Good financial management is a question of taking care of a series of details, and when you let one or more of these details slip, the impact can snowball to include other aspects of your financial situation.

Taking stock

Even if you feel your finances are fine, it is a good idea to conduct an occasional financial check-up on yourself. The following questions can help you determine whether the details of your household finances remain under firm control:

  1. Do you balance your checking account at least monthly? Even if you maintain a healthy cushion in your checking account, you need to regularly check that your records match the bank's. This will not only make sure you are making decisions based on up-to-date and accurate information, but it will also help you spot any new fees or errors on the bank's part.
  2. Are you getting an APY of more than 0.50 percent on your savings account? The FDIC reports that the average savings account interest rate has dropped below 0.10 percent, but chances are you can do better. There are several banks offering more than 0.50 percent today. That may not sound like much, but if you have the chance to earn five times more interest than the average depositor, why wouldn't you take it?
  3. Do you occasionally overdraft your checking account? Banks sell their customers on overdraft protection as if it were to their benefit, but using that protection is one of the big no-nos of banking. Overdraft fees are extremely expensive, and overdrafts themselves can be a sign of sloppy record-keeping or spending habits that will lead to other problems.
  4. Do you often carry over a credit card balance from bill to bill? As mentioned above, the average savings account interest rate is nearly zero, but the Federal Reserve reports that the average rate charged on credit card balances is still above 12 percent. Clearly, not all interest rates have fallen equally, which makes credit card rates an especially bad deal for the customer. In addition, carrying a credit card balance may be a sign that you aren't living within your means, which is the type of problem that can spiral out of control.
  5. Have you done a detailed calculation of your retirement needs? If you are saving for retirement, then good for you, but if you are doing so without calculating how much you will have to save to meet your retirement needs, then it is like starting a journey without knowing what your destination is or how to get there. The younger you are when you start retirement planning, the more manageable you'll find your savings goals.

As with your physical health, it only takes one thing going wrong to cause real problems with your financial health. So, this isn't a test on which you should feel good if you had satisfactory answers for most of the above questions. Unless you have full control of every one of the areas indicated above, you have some work to do so your next financial check-up can be a healthier one.

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