Conduct a thorough annual review of your finances covering net worth, budget performance, insurance adequacy, beneficiary accuracy, credit health, and retirement progress.
Include checking accounts, savings, investments, retirement accounts, home equity, and vehicle values. Use current market values, not purchase prices. Most people underestimate their net worth by 10-15%.
List all liabilities with current balances
Include mortgage balance, student loans, auto loans, credit card balances, personal loans, and any other debts. Note the interest rate on each to prioritize which to pay down first.
Calculate net worth and compare to last year
Subtract total liabilities from total assets. A healthy target is to increase net worth by at least 10-15% of your gross income each year through a combination of debt paydown and asset growth.
Budget and Spending Review
Compare actual spending to your budget for the past 12 months
Download bank and credit card statements to see where money actually went. Most people overspend their budgets by 15-20%, with dining out and subscriptions being the biggest overages.
Audit recurring subscriptions and cancel unused ones
The average American spends $219 per month on subscriptions but underestimates spending by $133 per month. Review every auto-pay charge and cancel anything you have not used in the last 30 days.
Calculate your savings rate as a percentage of gross income
Add up all savings and investment contributions for the year and divide by gross income. A minimum target is 15%, including any employer match. If you are behind on retirement, aim for 20-25%.
Set next year's budget with adjustments based on this review
Increase budget lines where you consistently overspent and reduce lines where you underspent. Build in a 3-5% inflation adjustment for groceries, insurance, and utilities.
Insurance Audit
Review health insurance coverage and costs for the coming year
Open enrollment typically runs November through January. Compare your current plan's premiums, deductibles, and out-of-pocket maximums against alternatives. A $50/month premium difference equals $600 per year.
Verify life insurance coverage equals 10-12 times your income
If your income has increased significantly, your coverage may be inadequate. Term life insurance rates increase with age, so adding coverage sooner is cheaper. Get quotes from at least 3 providers.
Review homeowner or renter insurance for adequate coverage
Confirm your coverage amount reflects current replacement cost, not purchase price. Construction costs have risen 30-40% since 2020. Increase coverage if you have made home improvements or acquired valuable items.
Check auto insurance rates and shop for better pricing
Auto insurance rates increased 20% on average from 2022 to 2024. Get quotes from 3-5 companies every 1-2 years. Bundling home and auto with the same company can save 5-15%.
Beneficiary and Estate Review
Verify beneficiaries on all retirement accounts
Check your 401(k), IRA, and pension beneficiary designations. These override your will. Major life events like marriage, divorce, or a new child may require updates you forgot to make.
Verify beneficiaries on life insurance policies
Contact each insurance company to confirm current beneficiary designations. Policies purchased through a former employer may still list an ex-spouse. Update primary and contingent beneficiaries as needed.
Review your will and power of attorney documents
If your will is more than 5 years old or you have had major life changes, schedule a review with an estate attorney. Power of attorney documents should name both primary and backup agents.
Credit Health Check
Pull your free credit reports from all three bureaus
Visit AnnualCreditReport.com for free weekly reports. Review each report for errors, unknown accounts, and incorrect personal information. Dispute errors online for the fastest resolution (typically 30 days).
Check your credit score and understand the factors affecting it
Payment history (35%) and credit utilization (30%) have the biggest impact. Keep utilization below 30% of your total available credit. A single late payment can drop your score by 50-100 points.
Verify your credit freeze status at all three bureaus
If you placed credit freezes, confirm they are still active. If you temporarily lifted a freeze for a credit application, check that it was re-frozen. Store your freeze PINs in your password manager.
Retirement Progress and Goals
Calculate your total retirement savings across all accounts
Add up all 401(k), 403(b), IRA, Roth IRA, and other retirement account balances. By age 30, aim to have 1x your salary saved. By 40, 3x. By 50, 6x. By 60, 8x your annual salary.
Confirm you are contributing enough to get the full employer match
Not contributing enough to get the full employer match is leaving free money on the table. The average employer match is 3-6% of salary. This match can add $50,000-100,000 to your retirement over 20 years.
Increase your retirement contribution by at least 1%
A 1% increase feels small from each paycheck but adds up significantly over time. Increasing from 6% to 7% on a $75,000 salary adds $750/year to your retirement savings, growing to over $30,000 in 20 years.
Review investment allocation and rebalance if needed
A common rule of thumb is to hold your age in bonds (a 40-year-old would hold 40% bonds, 60% stocks). After a strong stock market year, your allocation may have drifted 5-10% from your target.
Frequently Asked Questions
How long does an annual financial checkup take?
A thorough self-directed review takes 3-5 hours over a weekend: net worth (45 min), budget review (60 min), insurance audit (45 min), beneficiary review (30 min), credit report (30 min), retirement check (45 min). With a financial advisor, the meeting is 60-90 minutes with analysis prepared in advance.
What financial documents should I review annually?
All three credit reports (annualcreditreport.com), insurance policy declarations, beneficiary designations on all retirement and life insurance accounts, estate documents (will, POA, healthcare directive), Social Security statement (ssa.gov), and year-end investment statements showing performance and fees. Also review your prior tax return for missed deductions.
What benchmarks should I use to measure financial progress?
Key metrics: net worth growth rate (target 10-15% annually in building years), savings rate (target 15-20% of gross), debt-to-income (below 36%), emergency fund (3-6 months expenses), retirement multiples (1x salary by 30, 3x by 40, 6x by 50 per Fidelity), and credit score (target 750+). Track against your own prior years.
Should I pay for a professional financial review?
A one-time plan from a fee-only CFP ($1,000-$3,000) is worth it at major transitions (first job, marriage, home purchase, near retirement). Ongoing advisory (0.5-1.5% of assets or $2,000-$7,500 flat) suits complex situations: multiple income sources, stock compensation, rentals, estate planning. For straightforward finances, a thorough self-directed annual review using free tools is sufficient.