We are halfway into the year, and there is no better time to take stock of our finances than now.
A financial checkup is necessary, just like it is important for regular medical checkups. Many experts recommend doing a checkup every year, especially before the end of the year, to ensure you take advantage of tax-saving strategies.
when you are ready, hopefully, today or soon enough, here’s a checklist to use for your financial checkup:
1. Have You Gone Through Any Life Changes?
The first step is assessing your life situation. Have you made any changes since the last financial checkup? Think of marriage, divorce, accidents, a baby, job changes, job loss, or retirement. Any changes in your life can affect your overall financial situation. Take notes of all the changes and consider how they might change your present and plans.
2. What Are Your Goals?
Second, evaluate all your financial goals. Did you make any, and what is the progress so far? If there is no progress in any or particular goals, can you figure out what happened? Apart from the goals you already made, have you added any? If yes, add them to your list and revise any other changes.
Maybe you wanted to build an emergency fund, max out on your retirement fund account, buy a piece of land or get a degree or a professional certificate to further your career. All of those goals you made, check whatever you have accomplished, add new ones, and adjust those that need adjusting.
3. Is Your Budget Up To Date?
Is your budget up to date? Budgets are our financial blueprints. They shed light on how we use our income. If your budget is not up to date, it will be challenging to note any leaks into your financial system. Capture all the expenses you might not have left out through the months. The goal is to see how much you have left after necessities to meet your debt payments, savings, and investments.
Related post: How To Budget on a Variable Income
Assess your savings accounts, from your emergency fund to retirement account and other savings account you might have set aside for various goals. Have you reached your goals? If not, how much longer will it take you? Did you dip into your emergency fund for any reason? It’s time you came up with a plan to top it up.
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5. What’s Your Debt Status?
How well are you managing your debts so far? What is your debt-to-income ratio so far? Have you managed to reduce the load, or have you added more debt? If you are yet to make any progress or got yourself deeper into debt, it’s time to figure out what’s causing the issues.
The problem with debt is that as long as it keeps pilling and the money does not go into an investment that brings you money, you will not be financially stable. Rather than saving and investing, all your money will go towards interest and penalty repayments.
Read more about Drowning in Debt? Here are 4 Debt Pay Off Strategies to Consider
6. Risk Management
Are you, your assets, and your beneficiaries protected? Review your insurance covers, like health, home, auto, and life policies. Ensure that all details are up to date. If you bought new equipment, then ensure you notify your insurer and add them to the policy. Added a new beneficiary? Update your life policy to reflect this.
While at it, do not forget to review your premiums. Is it possible to save some money if you switched to a different insurer? Are your policies scattered all over the place with various carriers? Consider if you might spare extra cash and time by bundling them up with one insurer?
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Are your investments doing well? Calculate the return from each investment you own, including stocks, mutual funds, bonds, and real estate. If they are not performing compared to others in the market, you probably need to liquidate them and put the money into something more profitable.
Also, consider other investment avenues, especially if you have some leftover funds after paying for necessities and debts.
First things first, have you filed your 2020 taxes? The deadline for filing in Kenya is June 30th. If you have not, this is high time you got into it.
It is also a great time to plan for this year’s taxes. If you work online, KRA requires you to pay DST. Capture these and other prepayments so you can offset them next tax season.
If you have sold any properties (land, buildings, and stocks) at a profit, confirm whether you are liable for capital taxes. Review all the deductible expenses and take advantage of those you can claim, like retirement benefits and homeownership plans.
9. Estate Planning
Have you prepared for the worst? Will your beneficiaries be left fighting inheritance battles with just about anyone? Or will your money end up with the government when no one claims it from the financial institutions?
If you have not prepared a will, maybe it is time you got into it. For those that have a will in place, review it and make any necessary changes. Added a property or a beneficiary? Make the change. Disposed of some property or lost a beneficiary? Maybe you want a different executor for your will? The bottom line is, update your will.
How did you perform? Are you lagging, or should you give yourself a high grade? If you are doing poorly, you at least know where you need to put more work. If your finances are in good health, well, keep it up. Stay the course, and let’s review the finances again at the end of the year. Or in a year’s time.