Doing Your First Financial Checkup

man in black crew neck t-shirt using macbook

Already gathered everything you need for your checkup? High-five! You’re ready to dive deep into your monthly financials. 

Through this process, you’ll identify the inflow and outflow of your money, find areas where you’re spending unnecessarily and where you can cut back, and you’ll double-check that your insurance plans and investments make sense.

Getting started 

There are a lot of tools you might decide to use for budgeting, such as  Mint, Quicken, QuickBooks, YNAB (You Need a Budget), or PocketGuard. We’ll take a look at those later in this series. 

For this checkup, we recommend pulling up your favorite spreadsheet application like Excel or Google Sheets. Or just use a good, old-fashioned notebook and a calculator. 

Have ready all the information you gathered while you were prepping for your checkup.  

The current flow of funds

Use the information you gathered for: income, bank statements, monthly expenses, extra financial accounts, and tax returns

Your first check point: What’s coming into your bank account every month, and what’s going out? Are you leaking money in any unexpected areas? This part of the checkup will shine a light on how well you’re meeting your everyday needs. 

1 – Your money!  Review your checking and savings account balances, your monthly income, and any funds you have sitting in extra accounts (like Venmo) that you could spend. Take note of the total amount. In another column, write down the amount you can use for monthly expenses (meaning don’t include any savings that you don’t want to touch regularly). 

2 – What you pay for. You already did the hard work here, when you gathered your monthly expenses. Double check that you didn’t leave anything out and subtract the total amount from your money that you spend from monthly. 

3 – What’s left over. Note the difference between your monthly available money and the amount you spend monthly. This is the amount you can add to your savings or use for additional expenses beyond your monthly expenses. 

4 – What’s coming up. Our focus here is understanding your monthly picture, but of course, not every month is the same. If you know that you have irregular expenses coming up, like a trip or a yearly insurance premium, take note now so you can plan for them. 

Also, use your tax returns from last year to estimate whether you’ll expect a return this year (or if you should plan to owe). A mock return estimate will help and it’ll never be easier to do than now, when you have all your documents handy. 

5 – What can you cut back? Especially with credit cards, cable, internet, late fees, and subscriptions, your financial checkup will point out where you could potentially find cutbacks. Compare rates for insurance, and consider if switching providers is worthwhile. See if you’ve been expanding your entertainment budget and it’s ready for a trim, or if you can find a better product offer to bring to your current provider to find out if they’ll work with you on a rate change.

Finding areas to cut back can help reduce your monthly budget to free up funds for things you want to pay for, like travel. Plus, it protects your overall financial portfolio by having your money designated for specific items, not leaking out to unnecessary fees.

Going deeper

Knowing when your money comes in, how much is expected, what dates your bills are due, and what your final account balance should be by the end of the month helps you stay financially healthy. 

Are there hidden costs that you’re missing? From late fees, interest charges, and bank account maintenance fees to surplus cell phone data charges, annual subscriptions renewals, and extra in-app purchases, you could be increasing spending without knowing it. 

Analyze incoming bills to confirm the amount matches what you expect. If there are any leaks or surprising payments, see how you can cut them to protect your finances. Many fees, including credit card interest rates and monthly minimum payments, are negotiable. 

One thing we don’t all think about: Does anyone owe you money? Are you due any refunds for products you returned? Have you gotten back the ticket price for events that were cancelled due to the pandemic? Ever loaned a friend a little money that they haven’t yet repaid? Note any expected income on your sheet! 


Use the information you gathered for: income, debt, credit score

Next, you’ll want to peek into debts, loans, and your credit score. This part of the checkup is about looking at your longer-term needs. 

1 – What you owe. When you were prepping, you gathered your debt balances. Total them now and add them to your spreadsheet so you know the amount you owe. It may look like a lot of money; that’s OK! Doing this checkup is one step on the road to reducing that number. 

2 – Your debt-to-income ratio. Calculate your debt-to-income ratio (DTI), which refers to how much of your monthly gross (pre-tax) income goes toward paying your debts. Most lenders like to see DTIs of 36% or lower.

3 – Your credit score. The amount of debt you have is one of the biggest factors in determining your credit score. At this point, you’ve checked your score, so you know your current status. If you want to improve your score, reducing your debt will be important. 

Going deeper

Are there changes you could make? If you have “leftover” money from the previous step, could you put some of it toward paying down debt faster? Always confirm that the money you expect is actually going toward debt and loans, never getting lost in the shuffle.

Be sure to pay attention to your interest rates. High-interest debt is the very first debt you should focus on paying off (because it’s costing you the most on top of what you borrowed). 

If you have more than one credit card, think about consolidating and/or looking for a card with more benefits or a lower interest rate. Check with lenders on refinancing for lower rates, too. 

When you do more checkups, you’ll see how much progress you’re making on paying off debt, increasing your credit score, or if you’re slipping back into old habits. 

The future

Use the information you gathered for: savings, retirement and investments, and things you can sell 

Now, review your money management goals. You’re at the point in the checkup where you’re looking beyond month-to-month into your core financial health. 

1 – Emergency fund. Can you confidently say that you have at least three to 12 months of living expenses covered in cash? If not, pay attention to your emergency fund. This collection of cash is critical for protecting your finances, and helping in unexpected times like when you’re hit with large bills or if you lose your job. It’s OK if you don’t have an emergency fund yet. Building one is a great goal for your financial health, even if you start with only one month. 

2 – Retirement and investments. While you were prepping, you gathered all your retirement and investment information. Are you maxing out your retirement contributions? If not, can you increase the amount you pay into retirement? How are your other investments performing? Should you make any new investments? Are there any stocks you’re ready to cash out?

3 – Savings goals. Make a list of all your 5-year, 10-year, and  lifetime financial goals, then assess if they’re on track. Are you saving money in the areas you want? Do you need to switch directions? This list will help you see where you’re headed for the upcoming years.

You might want to think about: 

  • College fund
  • Retirement
  • First home, forever home, vacation home
  • Caring for elderly parents
  • Starting a business
  • Home renovations
  • Travel

Going deeper

As you prepared for your checkup, you made a  list of items you could sell. Now that you’re thinking about your savings goals, it’s the perfect chance to ask yourself which of those items you’re ready to part with. Look at how much you might be able to sell them for, then decide where you’d use that money. Would you start an emergency fund? Make a new investment? Knowing exactly what you’ll get out of it may make it easier to part with a few items. 


Use the information you gathered for: insurance

Looking at your insurance coverage is financially healthy both because it can help you avoid immense expenses when surprises happen and because you may find places to save. 

1 – Do you have all the coverage you need? Insurance can save your financial health from taking a major hit if something unexpected happens, so it’s important to review what you’re covered for. Do you have all the types of insurance you need? Remember that some (like health insurance and disability insurance) may come through your employer and others (like renter’s insurance) will be your own responsibility.  This article from Dave Ramsey may help you decide if you have everything you need. 

2 – Can you make any changes? Take the time to compare your current rates to competitors to see if you can lower any payments without losing coverage you need. 

Going deeper

Deciding what types of insurance you need is a personal choice, but there are some types that most people can feel comfortable without. This list from Investopedia is worth looking at to think through some types that you may not need.  

Moving forward 

Managing your money doesn’t have to be overwhelming or take up much of your time. Now that you’ve done your first checkup, next time it will be much quicker to take the temperature on what’s working and what’s not, and make necessary adjustments to recurring expenses and unexpected costs to save more. 

Keep both your short-term and long-term goals in mind, and you’ll see how well your financial strategy is working with every checkup you do. With your financial health a new priority in your life, you’ll find yourself noticing opportunities to save and improve your financial future. 

Read next: 8 Questions to Fine-Tune Your Financial Checkup (coming soon!)

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