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Stay Financially Healthy with an Annual Checkup

Aug 25, 2021 4 min read Heather R. Johnson

Key takeaways

  • An annual financial checkup helps you stay on track with your goals.
  • Budgeting is a simple way to control spending and increase savings.
  • A retirement portfolio review will help secure your future.


You get annual medical checkups and semiannual dental checkups. Why not give your finances the same kind of “primary care”?

By performing an annual financial checkup, you can assess whether you‘re following your budget and making the most of your investments. If you‘ve veered off course, you can get back on track to meet your financial, career and life goals.



When should you give your finances a checkup?

Your annual open enrollment season at work can be an ideal time to review your financial health. After all, your benefit choices—and their potential effects on your overall finances—will be top of mind. And while you’re at it, check in on your retirement account(s) to make sure you’re on target for your goal (and make changes if not).

The start of a new year can also make sense for your annual checkup—you‘ll get a head start on tax season, and you‘ll have year-end pay stubs and account statements to work with. It‘s also a good time to set goals for the year to come.

However, if you‘re monitoring your retirement fund and approaching your Social Security “full retirement” age Opens in new window—65, 66 or 67, depending on when you were born—you may want to review your finances around that date.

Then too, if you‘re getting married soon or have a baby on the way, you might want to assess your finances before these major life events.

Of course, everyone‘s situation is different—and yours may have changed drastically in the wake of the COVID-19 pandemic—but in general, here‘s what your financial checkup should include:


  • Analyze income and expenses

    Compare your after-tax income with your expenses for the past year. Did you spend more than you earned?

    Accounting software allows you to run profit and loss reports for easy income-expense evaluation. With a profit and loss report, you can see how much you spent on basic expenses like rent and utilities, as well as luxury items including restaurant meals and clothing splurges. Remember, these “discretionary” expenses can easily throw your budget off track.

    Next, look at your cash flow for the year to come. Do you expect any unusual expenses, such as a new car or that big vacation you couldn’t take due to the pandemic? Do you plan to retire or take maternity leave? If you don’t have savings to cover changes to your cash flow, adjust your spending accordingly.


  • Revise your budget

    Creating a budget is a great way to keep spending on track and meet your savings goals for the year. Seeing where your money goes can be an eye-opening experience. A budget calculator Opens in new window can make running your numbers relatively painless. If you already make a budget, adjust it annually to account for changes like health and home insurance costs or income changes.

    Compare your various expenses (morning lattes included) to your monthly income. If you find you have excess income, consider meeting with a financial professional to determine the best way to put that extra money to work.


  • Review your retirement savings

    Review your IRA, 401(k) or other retirement plan contributions. Are you saving enough? Can you save more?

    Aim to contribute at least 15% of your paycheck to your retirement funds, whether it’s through your workplace plan or an individual account. If that sounds like a stretch, start smaller—say, at 10% or as much as you can—and increase your rate by one or two percentage points each year.

    If you’re at least age 50 (or will be by year-end), take advantage of “catch-up” contributions: The IRS allows you to contribute up to $7,000 to traditional and Roth IRAs—$1,000 above the standard limit—and you’ll have until April 15, 2022 to fund yours for 2021.

    For workplace retirement plans like 401(k)s, 403(b)s or 457(b)s, 2021 catch-up limits are $26,000. That‘ s $6,500 above the usual $19,500 cap.

    Also, as your target retirement date draws near, consider paring back on your investment risk by allocating less of your savings to stocks and more to fixed-income investments such as bonds. Talk to a financial advisor to determine whether your portfolio includes an optimal mix of stocks and bonds for your age and goals.


  • Make a debt-free plan

    One silver lining to 2020’s financial clouds: The average American’s credit card debt fell for the first time in eight years, to $5,315, according to credit bureau Experian.1 Yet those balances began to creep up again   PDF opens in new window early this year, and with interest rates Opens in new window on “drastic plastic” hovering near 16%,2 that‘s still a lot of money wasted on interest payments.

    Can you set goals to reduce credit card spending and pay down debt? You‘ll save hundreds to thousands of dollars annually—money you can invest and watch grow.


  • Check your insurance coverage

    Assess whether you have the right amount of insurance for your life stage and situation.

    For example, if you’ve accumulated considerable assets since you bought your homeowners or renters policy, you may want to discuss an upgrade with your insurance agent or broker.

    If your children have graduated from college or you’ve paid off your mortgage, you may need less life insurance. If you just had a second child, you may need more.

    It’s not easy these days to find better health insurance rates, but it’s worth the time to review your employer-sponsored, individual or Medicare Advantage plans, particularly if you can get in before the annual open enrollment period ends. You may find equal or better coverage at a lower rate, giving you that much more to save—or invest in your skinny vanilla latte fix.


What you can do next

Look for accounting software to help with your income-expense evaluation. See how much you spend on basic vs. luxury expenses, and revise your budget accordingly. And of course, consult your tax and legal advisors regarding your circumstances.


  1. 1 Stefan Lembo Stolba, “Credit Card Debt in 2020: Balances Drop for the First Time in Eight Years,” Experian, Nov. 30, 2021 (experian.com/blogs/ask-experian/state-of-credit-cards/)
  2. 2 Kelly Dilworth, “Average credit card interest rates: Week of Aug. 11, 2021,” CreditCards.com, Aug. 11, 2021 (creditcards.com/credit-card-news/rate-report/)


Heather R. Johnson writes about finance, small business and health care from Oakland, Calif. Her work has appeared in the San Francisco Chronicle and Houston Chronicle, among others.


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