4 Easy Ways to Evaluate Your Financial Health

“If it ain’t broke, don’t fix it.” The old saying holds some truth, doesn’t it? You wouldn’t say that about your health, right? Just because you’re seemingly healthy, does not mean you should stop going to your health check-ups. Shouldn’t you treat your financial health the same way? Have a professional guide you through alternative ways to achieve good financial health! While the right team may help you get there, it is always good for you to stay informed. Educating yourself and working with professionals may provide a greater benefit to you. Check out these ways to tell the status of your financial health.

  1. Determine your net worth.

There are plenty of websites and apps that can do this for you, but to do it yourself is simple. Calculate all your assets such as your home, investments, and cash, but do not include your income; then subtract all your debt such as mortgage, credit card debt, or loans. The total is your net worth. By calculating this often you’ll be able to determine which way it’s trending, which can give you a better idea of the progress of your financial health.

  1. Calculate your debt-to-income ratio

Determining this monthly can help you stay on top of your debt. It’s easy to rack up debt when you don’t realize how much it impacts your financial health. Add up all your monthly debt payments and divide it by your monthly income. For example, if you have $3,000 in debt per month and bring in $5,000, you’d have a 60% debt-to-income ratio. That is triple the recommended ratio of 20% or less. Keep in mind, this percentage is a primary factor in your credit score. Though you may not like the number, it can be a great motivator for good financial health.

  1. Find out where your money is going.

How often have you spent a lot of your money without realizing it? If you haven’t started budgeting, it’s about time! Write out all your expenses to rid forgotten payments, eliminate unnecessary expenses, and understand your spending habits. This can also help you prioritize and have a good understanding of what’s important to you. Apps like Mint, import your bank statements to determine where your money goes, which can expose harmful spending patterns.

  1. Make sure your retirement strategy is aligned with your situation.

If you haven’t evaluated your risk tolerance, goals, and income needs in the last month, consider doing so ASAP. First, list your goals and timeline to achieve them. Then, consider your income needs in retirement where possible. Though you may think you’ll be in a lower tax bracket in retirement, that isn’t always the case. By determining an estimate of your income needs, you’re better able to plan. Finally, evaluate your risk tolerance. For a quick rundown on determining your risk tolerance, click here. Once you have this information, compare it to your current portfolio. Before you make any changes, consider getting a second opinion through a financial professional to ensure you’ve done the math correctly and to evaluate your current plan.

At RGA, we offer free virtual second opinion sessions where we dig deep into your portfolio. Then, we present our findings through custom-crafted analyses and propose ways to better your plan, if necessary. To learn more, schedule a time to chat! Click the link below, call 1-800-467-8152, or email info@ronaldgelok.com.

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