Your Financial Wellness Checklist

Woman making a financial wellness checklist

How healthy are you financially? As you near retirement, it’s a good idea to assess your financial wellness.  

“To know if you are well-positioned for retirement, you have to review your financial situation. This is important because you can’t make informed decisions without information,” says Matthew Vitlin, a Northwestern Mutual financial advisor. 

Use this financial wellness checklist to gauge your financial health and status

1. Create Retirement Goals 

What lifestyle do you want in retirement? For some, it might be the same as their current lifestyle without working; for others, it might be a life full of travel and fine dining. If your financial wellness isn’t aligned with your retirement lifestyle goals, you might need to make changes.  

Jake Hill, CEO of DebtHammer, has seen a disconnect between retirement goals and finances when people haven’t been realistic about how much they have to spend. “A lot of people enter retirement in a position that is not as good as they think, so spending large amounts of money on things like property or traveling can be detrimental to their finances,” he says. 

2. Track Income and Expenses 

Financial wellness starts with knowing how much money you have and how you’re using it. Income sources can include salary if you’re still working, Social Security retirement benefits, pensions or retirement savings, annuities, and rental property income, among others.  

Vitlin recommends tallying up cash equivalents, too—money that is stable and reasonably liquid. “I generally think of money market funds, lines of credit, short- to mid-term bonds, and accumulated value inside permanent life insurance policies as cash equivalents,” he says. 

Next, start tracking how much you’re spending and what you’re spending it on. A number of software programs and smartphone apps can help with this, including Mint, Pocketguard, and You Need a Budget (YNAB). This step will help identify patterns and trends, some of which might even surprise you.  

Then compare monthly income with monthly expenses. Are you underspending? Overspending? Breaking even? This information will help guide decisions and changes.  

3. Create a Budget  

When you have a handle on income and expenses, set a realistic retirement budget that will help you avoid running out of funds. “Ask yourself how much you need to maintain your current standard of living. If money gets tight, how much can you live on?” says Vitlin.  

Guadalupe Sanchez, founder of Budgeting in Blue, says most budgets fail because they aren’t sustainable or are too complex or because the budget’s financial goals are too ambitious. “If you haven’t been able to save for the past six months and then set a goal to save $500 every month, you’ll most likely fail because your existing spending habits won’t allow you to save that much,” she says. 

Sanchez also cautions budgeters to avoid using too many categories because tracking and organizing spending will take too much time. Keep it simple, and leave room for favorite treats or splurges. “A common misconception is that you can’t have fun when you have a budget. The other is that you can’t buy Starbucks. You can certainly take vacations, too—you just have to budget for them,” she says. 

4. Pay Off Debt  

Eliminating debt before retiring is not only a smart money move, it will also help reduce stress. Retirement-age debt might include a mortgage, home equity loan, medical bills, credit card balances, or vehicle payments. “If you have enormous debt but want to retire, know that it is virtually impossible to eliminate your debts without a steady income,” says Carter Seuthe, CEO of Credit Summit.  

The best way to do that depends on your situation, of course. “If someone has extra money to put toward debt, paying more on the highest interest rate debt first usually reduces more interest and repayment time than other debt repayment methods,” says Barbara O’Neill, author of “Your Guide to Happiness and Financial Security in Later Life.” She adds that some people prefer to pay off their smallest debt balance first, but either strategy is better than none at all. 

O’Neill recommends exploring the debt-elimination resources and tools at Utah State University Extension’s Power Pay site.  

5. Prepare or Update Your Will 

A last will and testament is a legal document detailing how you want your assets distributed after death. When minor children are involved, it includes a plan for their care, as well. If you haven’t created, reviewed, or updated your will recently, now’s the time to do it.  

Leif Kristjansen, founder and president of personal finance site, recalls a tense situation where the value of the deceased’s estate had changed significantly since they created the will, but they hadn’t updated it to reflect those changes. The individual had specified a dollar amount to be distributed to each of three offspring. Anything remaining in the estate was to be distributed directly and evenly to the deceased’s grandchildren.  

“At the time that they wrote their will, I’m sure they thought it was going to be a small sum in the remaining estate, but in actuality, each of the five grandchildren received almost twice what their parents did. A death is a stressful time, and this made it more stressful than it needed to be since some of the children were less than happy about the execution,” he says. 

Make sure your insurance policy and financial account beneficiaries are correct, too.  

6. Know What Your Home Is Costing You 

As you head toward retirement, take a hard look at homeownership and how it fits with the lifestyle you want in retirement. Even if you’ve paid off the mortgage, your home is a significant expense because of property taxes, homeowners’ insurance, maintenance, and utilities. That doubles if you own a vacation home.  

“As people start planning for retirement, various financial strategies apply regarding the home. If they sold it, how much equity would they realize, and where will they buy next, especially in a downsizing environment? Do they want to take out home equity loans for remodeling and renovation projects if they want to age in place, or do they want to spend the loan on travel or keep it as a rainy-day fund for unforeseen medical expenses?” asks John Bodrozic, co-founder of HomeZada, a financial management app for homeowners.  

Several financial options help retirees use their home’s equity to stay in their homes, too. They include a cash-out re-fi (refinance) and a reverse mortgage. An experienced financial advisor can help determine what’s best for your situation.  

7. Adjust Accordingly 

Armed with a clear understanding of your retirement goals, income, and expenses, you can make informed decisions about your retirement lifestyle. Understanding your financial wellness now can save heartache or disappointment later. And, with all important financial decisions, it’s a great idea to involve a financial planner in your decision-making. 

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