Financial freedom doesn’t have to be a distant dream. Making annual personal finance check-ins part of your life can help you gain the confidence, stability and security you need to make that dream happen. As an entrepreneur, career-switcher, young family, freelance artist, or small business owner, financial planning is essential for creating a solid foundation and building wealth over time. In this blog post we will explore how an annual big picture check-in will help demystify money management and get you on the path to financial freedom!
What is a Financial Check In and Why is it Important?
Personal finance check-ins (or Money Dates as I like to call them!) are a great way to help you stay on track with your finances. By setting a schedule for yourself and checking in on your progress regularly, you can keep yourself accountable and make sure that you are making progress towards your financial goals. But what is a check in?
There are a few different ways that you can go about setting up personal finance check-ins. One option is to set a schedule for yourself and review your finances on a regular basis. This could mean checking in on your budget every week, reviewing your accounts every month, or tracking your net worth every quarter. Whatever works best for you is fine!
Another option is to set specific goals and track your progress towards them. For example, you might want to save up for a vacation or pay off your credit card debt. By setting measurable goals and tracking your progress, you can make sure that you are making real progress towards reaching them.
If this is your first financial check in or your annual check in, I recommend diving even deeper. Look at your year's spending. What categories were highest? Which were lowest? Was there anything unusual, such as a wedding? Then, print out 3-6 months of your bank statements and/or credit card reports. Go line by line and label each expenditure as necessary, nice to have, or splurge. This will help you notice some of your spending trends and triggers.
No matter how you choose to do it, personal finance check-ins can be an important way to stay on top of your finances. The idea is to know where you are, where you came from, and where you plan to go! Money dates keep you accountable and make sure that you are making progress towards your goals. So if you haven’t tried them before, I encourage you to give them a try!
10 Things to Look For During Your Financial Check In & Why They are Important
Use it or lose it. Building financial confidence takes effort because you are strengthening a new muscle. By regularly visiting your financial status, that money muscle becomes stronger so that you can more easily make decisions that help you reach your goals. During your financial check in you should review your credit score, emergency savings balance, cash balances, investment balances, credit card debt, loans, and liabilities. You should also set short-term and long-term goals to help you stay on track.
10 step financial check in process:
1) Identify your goals- and yes, life goals are money goals, so list everything!
2) Examine your overall income- even slight changes can make a big impact.
3) Examine your overall expenses- were things what you expected? Do you need to make adjustments for the next year?
4) Evaluate your debts and liabilities
4) Calculate your net worth
5) Protect your assets- do you have the proper insurance? Have you written a will?
6) File for your free annual credit report and go through each line for inconsistencies
7) Note your credit score and how it has changed over the year
8) Evaluate your investment performance
9) Review your emergency savings
10) Review retirement account savings
1 - Your Goals
Your life goals are money goals! Want to see the world? Let's budget for travel. Want the flexibility to help friends when needed, either in person or financially, let's plan for it. Want to get married in the future (even if you don't have a partner yet)? Let's begin putting some money away now. Putting your goals into your budget will help you stay motivated and prevent you from racking up sudden credit card debt in the future or draining your emergency savings for something that could have been planned for.
2 & 3 - Income & Expenses
Are you making enough to afford your desired lifestyle? If you are racking up credit card debt just to afford your lifestyle, do you know what the gap is and how much your salary would need to be? On the flip side, are there places where you can trim your expenses and increase your savings rate? When it comes to income and expenses, each situation is unique, but you do want to be in control of your daily income/expense picture.
4 - Liabilities
Your loans and liabilities are important because they can affect your monthly budget and overall net worth. You should make sure that you're comfortable with the monthly debt payments for all of your loans and that the interest rates are reasonable.
5 - Net worth
Knowing your net worth — the total value of your assets minus your liabilities — is important for getting a clear snapshot of your financial health. Even if you find that your net worth is negative, it’s a valuable indicator of where you stand financially and what steps you can take to improve it. Having this knowledge can foster confidence in managing your finances, knowing the areas where you need the most help, and understanding where potential savings and investments can be made. Knowing where you are so that you can plan ahead will be the key to achieving greater financial success.
6 - Risk Management
Wills, Insurance, and More: Having adequate insurance coverage and a will are two important steps towards mitigating risk and protecting your assets. Insurance can help provide much-needed financial protection in case of an unexpected event like death, disability, or illness; it helps cover medical expenses and other bills you may face as a result. A will is also important for protecting your assets after death by ensuring that your wishes are met in regards to the distribution of your property, investments, and other possessions. Having these documents securely in place can give you peace of mind that your loved ones may be taken care of if something should happen to you.
7 - Credit Score
Having access to a free credit report is a great tool for managing credit and monitoring potential identity theft. By downloading your report from one of the three main credit bureaus (Equifax, Experian, and TransUnion), you can review your credit history, look for incorrect entries or signs of fraud, and check your overall score. You should review your credit report at least once every year to ensure accuracy and address any discrepancies as soon as possible.
Credit Scores are used to identify the level of risk a lender has in granting you money. Having a good credit score is important because it can affect your ability to get a loan, mortgage, or credit card. You should aim to keep your credit score as high as possible by paying your bills on time and keeping your debt levels low. I recommend that clients work towards a credit score of 750+.
8 - Investments
Your investment balances are important because they can help you grow your wealth over time. You should make sure that you're investing money in a way that aligns with your financial goals. For long term goals, such as retirement, you will want to consider a high risk portfolio to encourage growth over the next 30 years. For goals closer to the 5 year mark, you will want a more moderate portfolio.
9 - Emergency Savings
Studies show that most families could not afford an unexpected expense of $400. Your emergency savings balance is important because it can help you pay for those unexpected expenses. Whether it's losing your job, replacing a hot water heater, or paying for a pet's unexpected surgery, this is what an emergency fund is for. For regular employees, it is generally recommended to have 3-6 months worth of expenses saved in the emergency fund. For entrepreneurs, it is advisable to have 12 months of expenses in case of emergency. And yes, this should be in a high yield savings account (2%+) so that your money can make money.
10 - Retirement Savings
Monitoring your retirement accounts regularly is important for making sure you are on track for a secure financial future. To start, review your current investments and contributions to ensure that your portfolio is well balanced and properly allocated. Then compare the results of these calculations with any target goals or expectations you have set in order to see if you are on track to meet them. Additionally, be sure to take advantage of any employer matching contributions or other incentives available to help maximize your savings. Finally, make sure to review and update your retirement plan annually with updated goals and contributions levels so that you are always working towards a secure retirement.
How to set goals and adjust your budget
Setting and adjusting your budget can be a difficult process, but it's necessary in order to keep the money engine running smoothly. One of the best ways to set and adjust your budget is by creating financial goals. The best financial goals have a strong "why" and are specific, measurable, attainable, relevant, and time-bound objectives that you want to achieve with your money. Think: "Transfer $60 each week into my travel savings account so that I have $3,120 by the end of the year when I will travel to visit family for the holidays".
There are a variety of different financial goals that you can set, depending on your needs and wants. Some of the most common financial goals include building an emergency fund, saving for retirement, paying off debt, and investing in assets. To make sure that your financial goals are achievable, you need to create a realistic budget that aligns with your income and expenses. You may need to make some adjustments to your budget in order to ensure that you have enough money to meet your goals.
For example, if you are trying to save for retirement, you may need to reduce your spending in other areas of your budget. Alternatively, if you have a lot of debt to pay off, you may need to increase your contributions and make payments weekly to lessen your interest payments. The most important thing is to be proactive and stay focused on your goals. By setting and adjusting your budget based on your financial goals, you can achieve greater peace of mind and improve your overall financial situation.
How to automate your savings
There are a lot of different ways to save money, but one of the easiest and most effective ways to do it is to automate your savings. Automating your savings means setting up a system where a certain amount of money is automatically transferred from your checking account to your savings account(s) every month. This can happen through paycheck reductions at your place of employment or set up manually through your bank or online savings account.
Automating your savings is a great way to make sure that you're always putting money aside for future expenses. It can also help you avoid spending all of your money each month and end up with nothing left over for savings. Of course this only works if you don't turn around and just withdraw the money from that savings account. Automating your savings can be especially helpful if you have a hard time remembering to save money on your own.
There are a few different ways to automate your savings. The first way is to set up a transfer through your bank. Most banks will let you set up a transfer schedule where a certain amount of money is automatically transferred from your checking account to your savings account every month. This can be a great way to make sure that you're always saving money, even if you forget to do it yourself.
If you are a regular W-2 employee, you can also set up paycheck reductions through your HR department. This might mean setting up a transfer into your retirement accounts, HSA/FSAs, or into a general savings account. The great thing about this method is that you never see the money to begin with and won't be tempted to spend it.
Whichever way you choose, automating your savings is a great and easy way to make sure that you're always putting away money for the future.
3 benefits of regular financial check ins
There are a number of benefits to conducting big picture personal finance check-ins on an annual basis. Perhaps the most obvious benefit is that it can help you track your progress towards your larger financial goals.
Another big benefit of regular personal finance check-ins is that they can help you spot potential problems early on. If you notice that your expenses are starting to exceed your income, for example, you can take steps to address the issue before it gets out of hand.
Finally, regular personal finance check-ins can help keep you motivated. Seeing concrete evidence that you are making progress towards your goals can be really inspiring, and can help motivate you to continue working towards them.
All in all, personal finance check-ins are a great way to ensure that you're on track to meet your financial goals. By taking the time to review your income, expenses, and debt on a regular basis, you can make necessary adjustments to ensure that you're staying on budget. Finally, don't forget to set realistic goals for yourself - remember that it's important to celebrate your successes along the way!
Ready to get started? Read more about our services here.
Meet Molly, a Financial Advisor who specializes in working with artists, creative entrepreneurs, and small business owners!
Talking about money is hard. I make it easier.
After 20 years working in, managing, and eventually leading multi-million dollar arts organizations, AND the start-up of my own two successful businesses, I decided my passion was found in helping other creatives not only gain financial control, but thrive in the creative arts.
I want to help YOU have the freedom to live a creative life with a solid financial footing so that you can create your best work.
My goal is to help 300 individuals and creative business owners get solid when it comes to money and building the lives they want.
Will you be one of them?