A few months ago while doing my morning exercise, I became slightly disoriented. Concerned, I went to my doctor.

He put me on two medications and urged me to see a neurologist right away. After a series of tests that included two MRI brain scans, the neurologist gave me a clean bill of health. And, thanks be to God, I’ve had no further disorientation incidents.

My health scare turned out to be nothing of consequence, but I made the right decision to get a thorough review. After all, a minor symptom could signal a major problem, and small concerns can become big ones if left unattended.

The same is true in finances. A money-related matter that may be simple to fix now can be difficult to correct later. Just as it’s wise to give heed to what your body may be signaling, it’s a good idea to take note of various financial indicators — and to respond accordingly.

You don’t need a specialist. You can do a self-examination — and there’s no better time than at the start of a new year.

Assessing your financial health

Here are suggestions for “tests” to run and “symptoms” to observe.

  • Establish a baseline.
    If you’ve ever had to change doctors, it’s likely your new physician conducted a few extra tests on your first visit — not only to make sure various health markers were within normal boundaries but to establish a comparison baseline for subsequent checkups. Likewise, it’s a good idea to capture a snapshot of your current financial situation — a  baseline for measuring your overall financial health as the years go by.

    One such baseline is your net worth, a simple calculation that subtracts what you owe (liabilities) from what you own (assets). The information you need to calculate your net worth isn’t difficult to find. Your brokerage and bank statements are readily available online. A real-estate data site such as Zillow.com can provide a free estimate of your home value. Credit card bills and loan statements will help you tally your liabilities. The net-worth calculation itself can be done quickly using a computer-based spreadsheet or online calculator. (If you use SMI Private Client, you can calculate your net worth at SMIPrivateClient.com under
    Accounts > Assets & Liabilities.)

    A once-a-year net-worth calculation will give you a broad-based indicator of your financial fitness. Over time, your net worth likely will improve as your debt decreases and the value of your assets increases. (Asset values can go down as well as up, of course, so don’t expect the upward trajectory of your net worth to be uninterrupted!)
     
  • Evaluate your savings “endurance.”
    At SMI, we recommend building a savings fund of at least $10,000 for emergencies. Think of it as increasing your endurance — i.e., your ability to persevere and stay financially healthy when unanticipated expenses occur. To grow your savings steadily, set up an auto-draft for monthly savings.
     
  • Prevent injury.
    Many people injure themselves financially by being inattentive to important matters — such as paying bills on time. You can avoid such mishaps by automating payments. Create auto drafts from your bank account for your phone bill, water, electricity, gas, etc.
     
  • Review your “investment diet” to see if it is well-balanced.
    Diversifying investments lowers your overall risk and helps safeguard your financial security. Your fiscal check-up may indicate that it’s time to rebalance your portfolio.

    Also examine your asset allocation, i.e., how you have chosen to divide your investment money between stocks and bonds (again, see page 7). Your asset allocation decision should be informed by your age and by what you discover about yourself from taking SMI’s online Risk Tolerance Quiz.
     
  • Is your retirement plan getting sufficient “exercise”?
    Just as a doctor might ask if you’re getting enough physical exercise, your financial check-up should ask: “Am I making sufficient contributions to my retirement plan?” Financial planners typically recommend saving 15% of your salary toward retirement when younger, ramping up to perhaps 20%-25% when you’re an empty nester.
     
  • Gauge your “giving reflex.”
    Doctors use a reflex hammer to test how muscles respond to stimulation. A tap on the knee, for example, should generate a well-defined response. If not, there could be a problem.

    With that analogy in mind, think about your “giving reflex.” Are you quickly responsive to God’s tap? Do your “giving muscles” demonstrate spiritual vitality?

Three more vital signs

A financial checkup should also include a review of your budget. Has it gotten “out of shape”? Is your day-to-day money-management regimen working, or is it time for a new approach?

When big health costs occur, having health insurance (or a health care sharing plan) is crucial. Likewise, sufficient homeowner’s and life insurance can be essential. Review your coverage. Do you have enough? Or — regarding life insurance — are you perhaps paying for coverage you no longer need? The need for life insurance typically declines later in life.

We hope your financial checkup shows you to be in excellent condition, but even if you are, someday you’ll leave your wealth behind. How is your estate plan? Do you need to revisit it?

Stay healthy

Conducting a methodical yearly examination of your fiscal health is good medicine. Indeed, it’s a wise investment in your overall financial well-being.