The Importance of Doing a Financial Health Check

A financial health check is an excellent way to determine how you are doing in managing your finances. There are many Internet sites where you can do this on your own by simply answering a few simple questions.

These include such things as your age, whether or not you have a mortgage on your home, if you have a savings account which will help tide you over in tough financial times, if you have will in place and whether you have insurance to cover your outstanding accounts in the case of your death. The answers to all of these questions will help you determine whether or not you are financially healthy as well as give you ideas for financial planning.

At times you may receive a call from your bank asking such questions as well. The banks also provide free financial health checks for customers to let them know how much borrowing power they have. If you say that you do not have any investments for the future, naturally the bank will want to sell you a product because you do have financial leverage in the form of extra money each month. The representative may ask you to come into the bank for a free consultation, just so you can see how such an investment product will help you plan for the future.

You can take advantage of such a free financial health check without being obligated to purchase any of the products that lenders offer. It will give you a good idea of where you do stand even if you are not in any financial difficulty. You do have to be wary of such offers from lenders because they can be very persuasive and make you feel as if they are doing you the greatest favour in the world by allowing you to borrow money for an investment. If it is not something that you consider to be important, then you should not succumb to the persuasion.

Carrying out a financial health check is one way in which you can find ways of reducing your debt load with the ultimate goal of becoming debt-free. When you sit down with a consultant, you can look at possible ways of doing this without incurring any more debt or taking on more monthly payments.

If you find that you do have a lot of accounts on which you are making the minimum monthly payments, doing a health check of your financial situation will let you see how a consolidation loan would be beneficial for you in reducing the number of creditors you have and allowing you to make one lower monthly payment. The extra money that you realize in this manner could serve as the basis for a savings plan that you haven’t been able to manage.

While answering a few simple questions will give you an idea of where you stand financially, it is not very detailed. In order to do a more detailed financial health check, you have to sit down and really study your income and expenses.

This means making a list of all your debts and the income that you have from various sources. When you do list your debts, include the outstanding balance, the minimum payments required each month and the rate of interest charged on each one. Take stock of the payments to make sure you have all your accounts up to date so that you are not doing anything to impact negatively on your credit report.

A financial health check involves more than just developing a budget for the payments for which you are responsible on a monthly basis. You also have to include your living expenses – how much money you spend in food, the costs of electricity and fuel and petrol and repairs for the car.

It also includes the cost of child care, clothing and entertainment. When you look closely, you need to see if there are any areas in which you can cut down on some of these costs in order to have extra money that you can pay on your monthly bills in order to repay them in full sooner than expected.

You should also look to see if there are any areas in which you can save money on a monthly basis by switching providers. This can include such things as switching your Internet or telephone provider or even your lender to get a more competitive deal compared to what you are now paying

If you want to start paying down your debt, you may even consider applying for a credit card with a 0% introductory rate so that you can transfer the balance of one of your accounts and have this balance paid in full by the expiry date. In this way you can save money on the interest you are already paying.

Look at your savings accounts. Are they earning the best possible rates of interest? The same thing applies to any of your investments. They may not be earning as much as they should because they are not in the appropriate areas or maybe they are in high risk areas.

Do you have adequate coverage on your accounts so that if you should pass away, these accounts will be paid in full. Life insurance is another aspect of your finances to which you should pay attention. You need to make sure your beneficiaries have the finances they need in order to pay off your debts and still be able to live a comfortable life.