The term ‘financial health assessment,’ has been making rounds lately in the financial space, triggering individuals to conduct a mid-year review of their financial condition. Such an assessment covers a wide range of aspects – cash flow, debt, savings, retirement funds, insurance, and even estate planning.
High-interest rates could mean either of two things, depending on your financial situation. They could potentially increase the returns for those with substantial savings. However, for individuals with existing debts, these rates may lead to higher costs and a longer payment timeline.
Conducting a mid-year review provides insight into your progress towards achieving the financial objectives set for the year. It’s especially crucial for people who are self-employed or part-time workers, as they could use this opportunity to adjust their quarterly anticipated tax payments and avoid the burden of a massive debt with the IRS at the end of the tax year.
Certified Financial Planner Jaime Eckels warns against the ‘set it and forget it’ approach when it comes to financial objectives. Regular monitoring and review of your finances are required for effective planning, and adjusting to unforeseen circumstances should be part of these routine checks.
The financial health assessment process starts with evaluating your cash flow.
Mid-year review enhances financial health
It’s necessary to understand the inflow and outflow of cash to make informed financial decisions. Understanding your debt – type, amount, interest rates – is the next step. This provides information on your financial risks and stability, and helps create strategies for paying off debts. The status of your retirement funds and the longevity of these funds should also be analyzed, alongside your savings and insurance coverage.
Moreover, estate planning should not be overlooked in this assessment process. Reviewing wills, trusts, and other provisions ensures that a clear plan is in place for wealth distribution upon one’s death.
By closely observing cash flow, individuals can understand how their money is distributed, which in turn, facilitates necessary adjustments to enhance financial efficiency. Despite the challenges faced by many Americans in balancing expenses, a well-thought financial plan can make a significant difference.
To conclude, the mid-year ‘financial health assessment’ serves as a key strategy to maintain and enhance financial stability. The process not only provides actionable insights into your current financial status but also equips you to take corrective actions to secure your financial future.
