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Financial Health Check

Here are 20 questions that are designed to give you a pretty good handle on the general state of your 'finances':

What's the state of your mortgage? Are you paying a competitive interest rate? If you have an endowment mortgage, review the latest information and make an informed guess as to whether this will pay off your mortgage when the time comes.
If you are in debt, how much of it can you clear over the next 12 months?
Do you have your credit cards under control? Can you reduce the number you hold?
Can you reduce your outgoings?
How's your pension looking? Should you be investing more?
Does your investment portfolio need rebalancing? Is it appropriate to adjust the level of risk you're exposed to?
What are your spending priorities for the coming year? Do you need to update your spending budget?
Do any of your major possessions need upgrading or replacing? How do you aim to pay for this?
Have you scored any financial own-goals over the past year that you can avoid in future? For example, have you incurred any late payment charges on a credit card? If so, consider a direct debit arrangement.
Have you made a will? Does it need updating to reflect changes in your life circumstances?
Have there been any changes in your life over the past 12 months and are there any coming up? What's the impact on your finances?
Are you on top of your tax commitments? If you're self-employed, do you have enough money set aside for your next tax bill?
Have you claimed all the allowances - tax, state, etc. - that you're entitled to?
Do you need to talk to your accountant or financial adviser?
When you review your income stream(s), do you feel you are being fairly rewarded? Should you be booking a meeting with your boss to try to negotiate an increase? Is it time to move on?
Are there other sources of income you might tap into?
Do you have any longer-term savings challenges? Are you doing enough to meet them?
What were your financial objectives this time last year? To what extent have they been met?
What's your biggest financial fear for the next year? Is there anything you might usefully do to counter that fear?
Can you take any pre-emptive action? For example, if you reckon that interest rates could go up later in the year, or if there's a risk that your income might suffer for whatever reason, trimming your outgoings now means that you might get away with a less draconian response down the line.

There may well be other questions that you could usefully ask. At the heart of this process is the need to come up with an action plan. Don't be like the lemming who says 'yep, still marching to the edge of that cliff' and does nothing about it. Be like the lemming who dons a parachute and a life-jacket.

An important measure of your financial health is your net worth. Your net worth is the difference between your total assets and total liabilities.

You'll probably have three types of assets:

LIQUID ASSETS. Assets that can be turned into cash more or less immediately - current account balance, any savings accounts, cash in jam jars, etc.
PERSONAL ASSETS. The current estimated market value of your home, car, furniture, electronic equipment, jewellery, books, CDs and any other personal items that have monetary value.
INVESTMENT ASSETS. Stocks and bonds, pension plans and any other type of investment you may have.

And you'll (sadly) have two types of liabilities:

CURRENT LIABILITIES. Credit card debt, any outstanding loan balances, any money you've borrowed and need to pay back.
LONG-TERM LIABILITIES. Your mortgage, and any other debt that you are repaying over a long period of time.

To determine your net worth, deduct your liabilities from your assets. You now know your overall financial health. Determining your net worth is a key plank in getting your financial life in order.


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