Your Financial Health Check-Up

October 5, 2018
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Financially responsible people are often labeled as economically minded people. They’re not particularly gifted at keeping money in their pocket, they just think about it in a more critically.

Whether you aspire to make a pile of money or not, attaining a certain comfort in life depends on how free you can be in your financial choices. That’s why it’s worth getting in the habit of evaluating your financial life. Test your vital economic signs with these checkpoints.

What’s my credit score?

Your financial bones can be healthy without having good credit, but it’s harder to attain wealth without any borrowing power. If you have a credit score below 669, you’ve probably had trouble securing a loan or getting a decent interest rate on credit. A score between 670–739 makes it much easier to borrow. But if you really want access to enticing interest rates and beneficial financial products, aim for a score higher than 740.

How much have I saved?

How much money you should have saved varies based on your age, quality of life desired and insurance coverage, but you should always aim to have at least six months of emergency funds socked away. After you reach your emergency fund goal, continue your savings, but diversify it into (retirement) investments.

How much do I owe?

As free as you may feel in your financial life, if you owe a person or lender money, you’re still economically ill. How much debt do you have? How many creditors do you owe? Do you have any debt with high interest rates? Write down the details of your accounts and assess how much you owe, how much you have, and how much you need to pay on your debt to make substantial progress.

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It’s easy to brush debt aside, not wanting to face the stress and uncertainty, but this decision is preventing you from achieving economic wellness. If you have a juggernaut student loan, see if you qualify for deferment or forbearance. If you have raging credit card debt via various balances, see if you’re eligible for a balance transfer card. If your debt has reached a more severe stage, debt relief through third-party providers like Freedom Debt Relief or bankruptcy via the legal system can forge a new path.

What services, subscriptions, memberships did I pay for last month and not use?

Our on-demand world is flooded with attractive products and services that aim to fill our every want and need. As a result, we overindulge and incur wasteful spending. Have an $80 gym membership but you exercise once a month? Or maybe you pay $100 for cable, but you only use a few channels? Perhaps you spend $10 for a niche movie subscription service that you never use. We don’t feel these purchases as they happen, but they add up over the long-haul.

Am I fully insured?

Typically thought of as a hassle, insurance is an investment. If you have assets that you depend on and care about, it’s in your best interest to protect them with an adequate insurance policy. Depending on the quality and worth of your assets, this usually means more than minimum coverage.

How much is my rent/mortgage?

Living in a beautiful apartment in a trendy city? Splurge for a house you think will be a good investment? While it’s important to enjoy where we live, housing is most people’s biggest expense, meaning their choice in this category has a massive effect on their budget and overall financial situation. As a general rule of thumb, your housing costs shouldn’t exceed 30 percent of your monthly income. If you’re renting, consider adding a roommate and/or looking for an apartment in a less expensive neighborhood. If you’re paying a hefty mortgage, you probably have some space — rent a room out.

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How much do I have saved for retirement?

Determining how much to save for retirement is a challenge. Like an emergency fund, the exact savings total will depend on a few factors: the age you plan to retire, the amount of salary you’re used to earning and the quality of retirement you want. From there, you can start your calculations with the 80 percent rule, which estimates your retirement income at 80 percent of your pre-retirement salary, adjusted by other income like social security, part-time work, or pensions.

To decide how much to save, take your desired retirement salary and divide it by four percent. If your desired retirement income is $60,000, you’d need to save $1.5 million for retirement without requiring any additional income. This assumes you’re earning a relatively modest annual five percent on your investments, of course.

Our bodies depend on a lot of components operating together to function properly. Maintaining a stable financial pulse is no different. Keep the above questions in mind when wondering how your vital signs are looking.