Are you busily spending the extra cash in your flexible spending account? That’s a good choice. But while you’re visiting your dentist and eye doctor, there’s another area to conduct a “wellness check”: your financial health. As you head into 2020, you want to make sure that you are financially healthy, no matter what the new year throws your way.

Your doctor may occasionally perform a “stress test” to see how well your heart responds to rigorous exercise. You can do the same thing for your finances.

This five-step, year-end financial wellness checklist can help you figure out if you’re fit enough to weather a financial emergency, or if you might want to make a few tweaks.

REVIEW YOUR BUDGET

Wait, you don’t have a budget? Well, fix that immediately and start tracking where your money goes every month. The goal is to figure out how you’re actually spending your money, divvying it up into the categories of “committed” and “discretionary” expenses.

A good rule of thumb is to dedicate about 80 percent of your budget to committed expenses and 20 percent for discretionary. Discretionary expenses are “fun” things, like a cute new outfit, eating out or concert tickets — whatever makes you feel rewarded for your hard work. Committed expenses are things you need to pay every month. That includes paying your mortgage or rent, car loan, groceries and saving for the future. Typically saving and investing for the future makes up about 20 percent of your entire budget.

2020 Resolution: Track your spending so you know where money is going and, if needed, make changes to get your spending closer to that 80/20 split between committed and discretionary expenses.

ASSESS YOUR LIQUIDITY

Liquid assets can be converted to cash quickly if you hit unexpected financial turbulence, such as a job loss or a big repair bill. Having more cash on hand means you don’t have to turn to things like your credit card or retirement account.

2020 Resolution: If you don’t have at least six months’ worth of living expenses saved in an emergency fund, start setting aside some money each month with the intention of reaching that goal.

FIGURE OUT YOUR DEBT-TO-INCOME RATIO

Relying solely on your income as a measure of financial health will only give you part of the picture. It’s also crucial to know how much of that money is “spoken for” each month in terms of debts. Take some time to total your expenses for things like:

  • Mortgage, including principal, interest, taxes and insurance

  • Auto loans

  • Home equity or personal loans

  • Student loans

  • Alimony or child support

  • Credit card debt

Add them all up (don’t include other general living expenses, like utilities, food or entertainment), then divide the total by your pre-tax monthly income to find your debt-to-income ratio. So, for example, if your fixed debt obligation is $3,000 and your gross monthly income is $7,000, your debt-to-income ratio is 43 percent. Turns out that’s the maximum ratio recommended by the Consumer Financial Protection Bureau in order to obtain a “qualified mortgage,” although some lenders might want it even lower.

2020 Resolution: The higher your debt-to-income ratio, the harder it might be to weather a potential financial emergency, because you have less flexibility in your budget. You can either raise your income by taking on a side gig to earn some extra money or lower your debts. That might include downsizing your home or car or applying extra muscle to paying off existing loans.

CHECK YOUR CREDIT REPORT AND SCORE

Surprisingly, nearly 40 percent of Americans have no idea how credit scores work. (If you’re among those, this short quiz will get you up to speed.) Your credit score provides an important snapshot of your financial health and can be the ticket to lower rates for future mortgages, auto loans and credit cards. Lenders will use your credit score to gauge your ability to repay funds you borrow and reward a positive track record with lower interest rates and better terms.

2020 Resolution: Your credit report is a list of activities that make up your score, such as opening new accounts or any late payments. Make a habit of routinely checking your credit report at AnnualCreditReport.com where you can get a free report from each credit bureau annually. Note any changes and commit to good credit habits, such as always paying bills on time and only using 30 percent of your available credit to keep your credit “utilization rate” low.

If you want, you can also view your credit score — although many sites charge a fee to access it. However, nowadays many banks provide your score free of charge. Check to see if that’s a service your bank or credit card company offers.

CHECK YOUR INSURANCE

Insurance is a critical part of any financial plan because it protects all the good things you’re doing to save for the future. Take some time to check your coverage in these four key categories:

Homeowners and auto insurance: Have you had any changes that would require you to update your insurance? Perhaps you bought some expensive new jewelry, or you finished a home remodeling project. If it adds values, it’s possible you’ll need additional coverage.

Disability income insurance: Consider this “income security” insurance to keep your budget on track if you become disabled. And, if you think that’s unlikely, consider that a 20-year-old entering the workforce has a one-in-four chance of becoming disabled prior to retirement. See if your employer-sponsored disability coverage is adequate, or if you should augment it with a personal policy.

Life insurance: If you were to die unexpectedly, the last thing you want to do is add financial stress to your loved ones’ anguish. Life insurance can protect your family. While your employer may provide some coverage, it’s usually not enough to meet your family’s needs.

2020 Resolution: Schedule a meeting with your financial advisor or insurance provider to make sure that all your insurance policies are adequate to meet your needs should something unexpected happen.

And with that, your financial wellness check-up is complete! That means you can enter the new year with confidence, knowing that you’re taking steps to help get your financial life in good shape.

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