Managing Money A Good Financial Checkup Starts with the Right Questions

by Kate Ashford | January 17, 2019

Maybe you're juggling paying off student loans, building a career, marriage, kids, buying a house — or all of the above.

Even the most financially literate person will still face a lot of questions when it comes to navigating major life milestones from a money perspective.

A financial checkup can help you make sure you’re taking the right steps and saving the right way. It’s an opportunity to step back and assess the condition of your finances and your money outlook. Here are some questions to ask:

Do I need a financial advisor? (And, how do I find one?)

If you feel like you've got a handle on your finances and where you're headed, you might be fine to DIY your checkup. But if you've got questions, your life is changing (say, you’re house shopping, getting married, or having kids), or your financial situation has gotten more complicated, some professional guidance can be helpful.

Start by searching for advisors in your area via the Financial Planning Association or the National Association of Personal Financial Advisors. For an advisor who doesn’t require you possess a minimum level of assets, try the Garrett Planning Network. You can also find a financial planner through your banking institution. Experts generally recommend finding a certified financial planner (CFP) who’s met certain educational and experience requirements.

You can also ask friends, family and coworkers. Just keep in mind that sometimes a planner works best with people in a particular situation — nearing retirement, for instance, or with assets above a certain amount — so ask people who are in circumstances similar to yours.

Meet or speak with at least two to three financial planners to figure out who’s the best match for your goals. Many will offer a free consultation to new clients. You’ll want to determine whether you’re looking for a one-time meeting or an ongoing relationship. Some planners charge by the hour or by project, which is helpful if you’re looking for a single session or a checkup, say, annually or every five years.

Experts generally recommend finding a certified financial planner (CFP) who’s met certain educational and experience requirements.
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Am I saving enough?

The sooner you start saving, the less you have to put away each month to reach your goals — that’s the potential power of time combined with compounding. Make sure you have an overall savings plan that includes any employer-sponsored retirement accounts and other savings goals.

"I always suggest you shoot for saving 10% as a minimum," Mark LaSpisa, a financial planner in South Barrington, IL, says of retirement-savings vehicles like a 401(k). This rate will, in most cases, be more than enough to maximize any employer matching you’re eligible for. "If you wish to be comfortable in retirement, you need to have a plan to move [your] savings rate up to 20%," LaSpisa says. "This may mean adding 1% to your savings rate every time you get a pay raise."

Am I paying off my debt the right way?

On average, Americans under age 35 owe $67,400 in debt, according to a recent report by Money Magazine. Americans’ debt load peaks between the ages 45 and 54, averaging $134,600, the report says, while those 75 and older average $34,500 in debt. That includes mortgages, student loans, credit card debt and vehicle loans. Consider consulting an advisor about the spread of your debt and what an aggressive, yet realistic, pay-down plan would look like.

How’s my credit?

Credit history affects a variety of things, including your eligibility to secure loans and the interest rates credit issuers may offer you. You can check your credit score through banks and online services without harming it, but simply knowing your score isn’t enough. Ask an advisor how your score looks against your long-term financial goals, and how to improve it if needed. Do a little digging to learn about what credit is, why it matters and ways to potentially improve your score.

How should I keep track of my spending?

If you aren’t budgeting in a way that works, now’s the time to get a handle on your cash flow. An advisor can help you devise a tracking system or point you to digital tools that can assist.  "It's my number one recommendation," LaSpisa says.

If you wish to be comfortable in retirement, you need to have a plan to move your savings rate up to 20%.
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Do I have enough insurance? (And the right kinds?)

Many people under 40 are meeting some of their insurance needs through group benefits at work, says Byrke Sestok, a financial planner in White Plains, NY. But many also take what’s offered without adding on, which can leave them underinsured, particularly if they have a family. Along with basic property insurance, such as auto and home, consider whether you have enough (and appropriate) life insurance and disability coverage.

"Life insurance through work is typically either a flat $50,000 death benefit or one to two times base salary," Sestok says. "This is not sufficient if you are a young homeowner or have children." Purchasing additional group life insurance through your employer often costs more than buying a private term policy, so do the comparison.

If your employer offers it, group disability insurance typically covers 50% to 60% of your salary, which is a good start. Many group disability plans also offer the option to purchase additional coverage up to 66 2/3% of salary, and it's a good idea to do so.

Talk to your advisor also about your home and auto insurance. "Do-it-yourselfers frequently go for the lowest premium they can find without understanding the lesser coverages," Sestok warns.

father leaning over to kiss his infant on the cheek in bed

Am I managing my student loans correctly?

The average student loan payment for a borrower aged 20 to 30 is $351 a month, according to Student Loan Hero. And one student-debt study released in 2016 indicated that 60% of borrowers expect to be repaying their loans into their 40s. Meanwhile, many people aren’t aware of their repayment options, from refinancing a balance with a high interest rate to student loan forgiveness programs for people working in the public sector. (Public service includes jobs like working for state or local government, or for a non-profit.)

“There’s a huge group that doesn’t know they could be making differences in their student loans,” Sestok says. An advisor can help you determine the best strategy for you, whether your goal is to lower your monthly payment or pay less over the life of your loans. You can also get more information on forgiveness programs and other repayment options from Student Loan Hero or from the US Department of Education.

What estate planning should I be doing?

The simple answer is that it’s never too early to plan ahead and create security for the people who depend on you. Estate planning in your 20s and 30s can be pretty straightforward since you may not have many accumulated assets or children. That said, without the basic documents, you leave it up to the state to carry out disbursements. Better to codify your wishes through a basic will and financial powers of attorney.

And don’t forget to include digital assets in your planning, such as email and social media accounts. "Without legit planning for your online accounts, from financial sites to social media, your family may be locked out of accessing content," Sestok says. "Your accounts could be frozen or deleted, depending on the terms of agreement of each site."

Am I investing wisely?

"Your advisor and you should be regularly confirming that your investment mix is correct," Sestok says. "It's important to ask your advisor what might happen to your portfolio if the stock market goes up or down 20%, so you can determine whether you can handle the swings."

A financial checkup is also a good time to confirm what you’re paying for all of your investments. You may be able to consolidate accounts or roll over an old 401(k) to reduce fees, and you might decide that you’d rather be in a cheaper selection of funds. “Your advisor should be able to talk to you about what you’re investing in, what the price is and why it’s worth it,” Sestok says.

Experts recommend having three to six months of living expenses in a liquid account earning a small amount of interest.
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Do I have enough in my emergency fund?

An emergency fund is an essential part of a good financial plan, but the amount you need may change as your circumstances change. For instance, if your everyday expenses go up, you should have more in savings in case you lose your job or another financial setback occurs.

Make sure you’re covered for unexpected events and that you’re keeping the cash in the smartest place. Experts recommend having three to six months of living expenses in a liquid account earning a small amount of interest, such as a money market account or bank savings account.

Kate Ashford

loves helping to answer questions about finances. Her work has appeared in Money, Parents and