A Painless Financial Check-Up
by Gary Foreman
Hate numbers? And math? And budgeting? If you tend to ignore your finances because you dislike dealing with them, you could be heading for money trouble without even knowing it. Here are a few fast, painless techniques to take your financial temperature.
What’s the quickest way to check your financial health? If you don’t like accounting, math, and bank statements, you’ve probably never really taken your financial temperature. But is there a fast and painless way to get a feel for whether you’re in financial trouble?
Yes, there are a couple of techniques that you can use. Obviously, they’re not going to give you as much information as if you took the time to do a personal balance sheet and budget. But they will let you know if you’re heading for serious financial trouble.
Your bank account history will tell you a lot
One technique is to take a look at your bank record. One biographer said that when he started to do research on a person, the first thing he wanted to know was how that person spent their money. He felt that if he could look at their bank record he’d learn more about that person than if he went to interview friends and relatives.
We can learn a lot about ourselves in the same way. What’s the biggest lump sum you paid out last month? If you still have a mortgage, that should be it. If the biggest payout went somewhere else, you might want to ask yourself ‘why?’ It might be OK. Paying for college is expensive. But if your car payment is that high, you could be heading for money trouble.
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Maybe you don’t have a mortgage payment. Perhaps you’re a little older and have already paid it off. If so, the biggest sum could have gone to your retirement savings account. Or are you taking that money and using it to pay for a boat or other luxury instead?
Then take a look at the other big transactions. How many of them are to pay monthly bills for things you bought long ago? Are you still paying for the furniture that’s been in your living room for three years? What about TVs, stereos and electronics? Making monthly payments on those types of items is a warning sign you could be heading for financial trouble.
Make a plan to get back out. Get How to Conquer Your Debt No Matter How Much You Have and create a debt payoff plan personalized to your budget and lifestyle.
Now let’s do a little rough math. Take a look at your deposits for the month. Then compare those big unavoidable monthly bills. You know, for your mortgage, car payments and utilities. Do those payments consume more than two thirds of your deposits? You’re in dangerous territory. A closer look is in order.
Don’t forget about the little transactions either. Are you making a lot of little payments to credit card companies? Maybe you’re spending too much time in the mall. What about ATM transactions? Are you always just a little short of cash? Time to take a look at some of that ‘miscellaneous’ spending. Those five and ten dollar lunches can add up over time.
Take an even closer look at your credit card statements
What about your credit card bills? Are you among the 30% who pay off all their purchases every month? If so, you probably have your spending under control.
Take a quick look at the credit card statements. Can you remember what you bought with each charge? If you can’t remember what you bought, there’s a good chance that you didn’t need it. Think about all the ones you do remember. Were you buying things that you really needed? Or was it for something that you just wanted at the time? Have you used all those things since you bought them?
Here’s a quick test for you. Are you just paying the minimum each month on your credit card account? Flash the warning lights! Look at it this way. For every $1,000 you owe on your account, you’re probably paying upward of $200 each year in interest payments. That’s more than $20 every month that doesn’t bring any food, clothing or anything else into your house. Do your own math to see how much is flying out your window every month in interest.
Use these guidelines to choose the best plan to pay off your credit card balances.
How you view money could be helping or hurting your finances
Finally, how do you feel about money? Some people look at money as ‘fun tickets’. They think that you buy stuff and happiness follows. Those are usually the people with big credit card bills. Others view money as a measure of their success. They need to earn more than their neighbor to feel ‘fulfilled’. Their income (and what they buy with it) determines how happy they are. Since they’re always on a quest for ‘more’ they can’t be happy with what they have. It’s a great formula for a lifetime of unhappiness.
Well, there you have it. A quick check-up on your financial health. I hope you found yourself in tip-top shape! But if not, remember that we were just looking for the symptoms today. It’s up to you to take a few more tests and find how bad the illness is.
See, that wasn’t so bad, now was it? Don’t forget to make an appointment for your check-up next year!
Reviewed November 2021
About the Author
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. You can read Gary's full bio here. Gary shares his philosophy of money here. Gary is available for audio, video or print interviews.
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