How To Create A Financial Wellness Checklist (2024)

As Americans continue to deal with financial stress due to soaring inflation, higher gas prices and rising food costs, taking inventory of your current finances and preparing for the unexpected can help you make more informed decisions about your finances and set new financial goals.

According to a 2018 financial capability report from FINRA, 53% of Americans reported that thinking about their finances made them anxious. However, given the economic effects of the pandemic, including supply chain issues and rising inflation, it’s likely that those numbers are even higher today.

If you share that anxiety, it’s crucial to understand that shying away from your finances is not the answer. In fact, it’s just the opposite. Practicing financial wellness will help ease your anxiety because it empowers you to take charge of your finances and work towards setting yourself up for a brighter future.

8 Questions to Help Your Financial Well-Being

This checklist is a list of questions that will help you determine where you stand financially and what your goals should be for the future.

Everyone’s situation is unique, so no two checklists will look exactly alike, and this isn’t a one-time activity. You should review it at least once a year to make sure that you’re still on track to meet your financial goals.

Here are the major questions that you’ll want to ask.

Am I Saving Enough Money for Emergencies?

As a general rule of thumb, it’s a good idea to have enough money in a savings account to cover 3 to 6 months worth of expenses. The goal is to have sufficient funds to cover a large unexpected expense or keep you afloat if you lose your job.

If you’re financially struggling, even saving a little can be helpful. Erin Ellis, Accredited Financial Counselor at Philadelphia Federal Credit Union (PFCU), believes that creating a habit of saving money consistently is more important than how much you can put away at any given time.

“Think about setting a goal to add money to your savings account on a monthly basis or each time you get paid,” she advises. “It may take a bit of time to [build up your fund] and sometimes you may need to dip into it, but if you start a habit of saving consistently, you’ll eventually get where you want to be.”

Read more: How To Create An Emergency Fund

Am I Spending More Than I Make?

According to Enzo Pellegrino, certified financial planner and founder of TLWM Financial, the easiest way to determine if you’re spending more than you make is to keep an eye on your account balances. If they’re increasing over time, you should be good to go. If your account balance is decreasing, it may be a warning sign.

Still, it’s important to note that overspending isn’t solely attributable to lifestyle creep, or taking on more expenses as your income increases. It’s also the case that your dollars may just not be stretching as far as they used to. According to the Bureau of Labor Statistics, food prices are up 10.8% year-over-year from April 2022, representing the largest 12-month increase since 1980.

Similarly, housing costs are also on the rise. The Pew Research Center found that 46% of American renters spent 30% of their income on housing costs, and another 23% spent 50% of their income just keeping a roof over their heads. Since then, those numbers have likely increased since CoStar Group, a real estate data source, found that rents rose 11.3% last year on a national scale.

If you’re having problems with overspending, Pellegrino says that budgeting is key. Namely, the process involves cutting unnecessary expenses or finding ways to bring in additional income. However, whenever possible, he says it’s best to try to live below your means to avoid the temptation to spend more than you have on hand.

While he acknowledges that making these decisions can be difficult in the short term, he believes that the added security from meeting your financial goals will be worth the effort in most cases.

What’s My Credit Score and How Can I Improve It?

Unfortunately, there’s no one-size-fits-all solution for improving credit scores. If you have a collections account on your credit reports, it may be more challenging for you to build credit than someone who is starting out and has no negative marks on their reports. Ellis emphasizes that it’s essential to make all of your payments on time, including credit cards, medical bills, student loans, and buy now, pay later purchases. According to FICO, just one late payment that’s 30 days old can knock over 80 points off your credit score if you have excellent credit.

Beyond that, she also feels that it’s also important to pay as much above the minimum payment as you can each month. Ideally, you should strive to pay off your credit card balances in full, but if you’re unable to do so, she suggests paying more than you spend to decrease the total amount that you owe.

Do I Have a Plan for Paying Off Debt?

If you have unpaid balances, Ellis feels that creating a plan to tackle your debt is essential. However, the plan can vary depending on how many balances you have in your name and the interest rates charged on each of those accounts.

“If you only have one unpaid balance, the plan is pretty simple. You just make the largest payment you can until that balance is fully paid off,” she says. On the other hand, if you have multiple debts, it’s a good idea to follow a debt pay off plan.

The method Ellis suggests is more commonly known as the debt avalanche method. You make the minimum payment on all of your accounts, except the one that charges the highest interest rate. For that card, you’ll want to make as large of a payment as possible, and you’ll continue doing so until that balance is paid. Then, use the same method on the account with the next-highest interest rate.

The downside of the debt avalanche method is that it can take a while to see substantial progress, especially if the balance on your highest-interest debt is fairly large.

If you prefer instant gratification, you may want to try using the debt snowball method where you tackle your smallest balance first. This method lets you experience a series of small wins at the beginning of your debt pay-off journey, which may help you stay motivated to keep making progress.

Read more: Debt Snowball Vs. Debt Avalanche: The Best Way To Pay Off Credit Card Debt

How Much Are My Retirement Savings Worth Today?

When it comes to retirement savings, Pellegrino says it’s all about knowing where you stand today and how much money you’ll need to live comfortably once it’s time to retire.

“Think about how much you’ll want to spend on a monthly basis when you’re ready to retire. Then, take some time to figure out how much money you’ll receive from non-investment sources like Social Security,” he suggests. ”The difference between those two numbers is the amount that you should aim to save for retirement.”

While that advice may sound daunting, particularly given the way the stock market has been fluctuating lately, it’s important to remember that saving for retirement is a long-term goal. Making a habit of contributing to your accounts regularly is what’s really going to make a difference in the long run.

If you’ve just started saving, Ellis recommends exploring any options that your employer may provide, such as a match incentive program that will help you increase your savings or an automatic deduction from your paycheck.

Ifyour employer doesn’t offer a retirement plan, you can still prepare by opening a tax-advantaged retirement savings account on your own.

Roth IRAs are a popular place to start because they allow you to make tax–free withdrawals, meaning that you pay tax on them the year you make the contribution rather than when you take the money out of the account.

However, they’re only available to those with lower incomes. For example, if you’re a single-filer under 50 and your modified adjusted gross income (MAGI) is less than $129,000, you can contribute up to the $6,000 limit for tax year 2022. Higher earners may be able to contribute a reduced amount, but those who make more than $144,000 are disqualified from contributing.

You can also contribute to a traditional IRA or 401(k). However, you’ll have to be prepared to be taxed when you’re ready to take money out of your account.

Do I Have Disability Protection if I Can’t Work?

As the name suggests, disability protection is an insurance policy meant to help you provide income if you become disabled and can no longer work. There are typically two types of plans to consider, short-term disability insurance, which is meant to provide for you while you’re suffering from a temporary illness or injury, and long-term disability insurance, which is more permanent.

Both experts recommend taking advantage of any employer-offered plans. Typically, those options will be more affordable and may have fewer restrictions compared to policies offered by insurance brokers. The Bureau of Labor Statistics found that short-term disability insurance typically costs around $0.05 per hour worked while long-term disability insurance costs around $0.06 per hour worked.

Once you have an idea of your options, add up your monthly expenses and compare that number to the amount of income you receive from the plan that’s being offered to you. If you’re self-employed or need additional coverage, you can purchase disability insurance through an insurance broker. However, be aware that these programs come at a cost and that insurers may impose certain eligibility requirements.

Is My Life Insurance Coverage Enough to Provide for My Family?

Life insurance is meant to help financially provide for your loved ones if you die unexpectedly. While there are many different types of life insurance to choose from, people generally either select a term policy, which lasts for a set number of years or a whole policy, which will last until death as long as you keep paying your premiums.

The need for life insurance depends on individual factors. As a rule of thumb, if you’ll leave behind any expenses when you die, you should think about getting a policy to cover those costs. Then, the next step is to determine how much coverage you need. For that, Pellegrino recommends considering the costs of some of your biggest expenses.

“Think about if your house needs to get paid off, if your kids need to go to college, if your spouse will need to depend on your retirement income,” he advises. “Those costs added together will give you an idea of how much coverage you may need.”

Do I Have a Will and Is It Up to Date?

If you don’t currently have a will, Pellegrino recommends creating one as soon as possible. He cautions that, if there is no will left behind, your state will typically be in charge of what happens to your assets. This process is better known as probate. Additionally, each state has different rules for determining how probate works, so the process can often be costly and time-consuming.

“Most people have worked too hard to have someone else decide what happens to their estate,” he says. “That’s why it’s so crucial to have the right documents in place.”

Once you’ve created a will, he suggests that you review it at least once a year. Some years, it may stay the same, but if any of your wishes change over the course of the year, it’s best to get everything updated ASAP.