The beginning of a new season is a good time to review your finances. It is important to regularly review your finances to ensure the success of your financial plan. But how do you know what to look for and how often should you conduct a financial review? While it’s good to take a look at your financial situation at least once a year, conducting a quarterly financial review can help you stay more connected to your money and goals. If you’re not sure what to pay attention to, use this helpful checklist as a guide.
1. Start with Your Credit Report and Scores
Your credit report and scores are two of the most important pieces of the financial health puzzle. Good credit scores and an established credit history can make it easier to get loans when you need them and enjoy favorable interest rates on borrowed amounts. As part of your quarterly financial review, check your credit report. It’s best to check your reports from all three major credit bureaus if possible, as Equifax, Experian, and TransUnion do not always include the same information in your reports. You can get your credit reports for free through AnnualCreditReport.com. Alternatively, you can get your credit report and scores through free credit monitoring services like Credit Sesame or Credit Karma. Here’s what to look for while reviewing your report:
- Check the accuracy and update your personal information
- Review the current balance and payment history for each account
- Look for any new accounts opened or credit inquiries, which could be signs of potential fraud
- Check for any negative remarks, such as late payments, collection accounts, or public records
If you notice any errors or inaccuracies, contact the credit bureau that provided the information to dispute it.
2. Move on to Your Budget
A budget is very helpful for keeping spending in check and working toward your savings goals. During your quarterly financial review, go through your monthly expenditures in detail. Look for expenses that have increased or decreased, or new expenses that have been added since the last quarter. Next, review your income. Are you earning more, less, or the same amount? If your income has increased and your expenses have decreased, that means you have more money to apply toward paying off debt or saving. On the other hand, if your income has remained the same and your expenses have increased, you may need to review your spending to see if there is anything you can cut back on or eliminate. If you have debt, review your current debt repayment plan. Ask yourself if you are still on track to pay off your debt by the target date. If you are cutting back on expenses or your income has increased, consider increasing your monthly debt payments to eliminate your balance faster.
3. Give Your Investments a Second Look
The stock market can be volatile, and sometimes your investments may experience more extreme ups or downs than others. Including a portfolio check as part of your quarterly financial review can help ensure that you are still maintaining an appropriate asset allocation based on your risk tolerance. You should also review the fees you are paying for your investments every quarter. Higher fees can significantly impact returns and may have an even larger effect when the market is down. If you are conducting a financial review in the fourth quarter, you might also want to consider harvesting losses in your portfolio to offset any gains you’ve realized during the year. Tax-loss harvesting can help minimize the tax impact on the returns from investments that are performing well.
4.
Check Your Insurance Coverage
You need insurance to cover your home, car, life, and health, but that doesn’t mean you have to pay more than necessary. Once a quarter, review your coverage amounts, premiums, and deductibles. See if you qualify for any discounts on coverage that you aren’t taking advantage of, or if you can reduce your premiums by increasing your deductible. Also, look for any gaps in your insurance plan. For example, if you recently got married or welcomed your first child, it may be time to consider life insurance if you don’t already have it. Life insurance can provide a financial benefit to the surviving spouse to pay off debts, cover monthly expenses, or help with child-rearing costs in the event of your passing.
5. Review Your Retirement Plan Contributions
The earlier you start planning for retirement, the better, and your workplace plan can be a great way to get started. If you are contributing to a 401(k) or similar tax-advantaged plan at work, review your contributions each quarter to get an idea of how much you will contribute throughout the year. If you aren’t on track to reach the annual contribution limit, consider adjusting your contribution rate to reach the target. A traditional or Roth IRA is another saving method in addition to or instead of your workplace plan if your employer doesn’t offer a 401(k). If you haven’t opened an IRA account yet, review your options and budget to determine how much you can afford to save in one of these accounts each year.
6. Update Your Goals
Setting goals can be a significant motivator for saving and being more efficient with spending. The final part of your financial review is to check in on your goals each quarter to see how you’re progressing. If there’s a goal you can achieve, consider new goals you can set as you continue to develop your financial plan.
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Source: https://www.thebalancemoney.com/quarterly-financial-review-checklist-4163666
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