I get questions related to how frequently should you check in on various aspects of your finances. It’s normal to want to “over check” things to have a sense of control — but when does it become just a bother? On the flip side, some people may forget (or avoid) checking in on certain items out of fear. So, I wanted to provide some simple guidelines for you to use to help streamline your own process for checking in with your finances.
Things to Check in with Monthly
Emergency fund:
You have one, or are working toward one, yes? As you’re establishing your emergency fund, you should check in with each paycheck. Then you can move to monthly and then less frequently after you establish a solid energy fund. Aside from checking how much emergency fund you have — you’ll also want to make sure it’s earning you money in the background. The account needs to be liquid and easily accessible. But there are a variety of accounts such as iBonds, savings accounts, money market accounts or some other type of secure, liquid, interest bearing account to choose from. Banks often have introductory rates and slowly reduce interest rates after you’ve been with them a while. Inflation and interest rates change so the vehicle you use for your emergency fund might need to be updated once every 3-5 years depending on those circumstances.
Savings goals:
Evaluate your savings goals and figure out what you’re working toward. Monitor progress monthly. A separate savings account (or some banks allow you to create sub accounts) can be a nice way to see visual progress toward your goal whether it be for your next vacation, a house down payment, a move across the country, or a sabbatical fund.
Budget:
Depending on where you are with your savings rates above, check each paycheck or monthly. Better yet — set up an auto transfer to happen in the background that way you can take this off your checklist completely. Focus on saving first, then spend the rest.
Things to Check in With a Few Times a Year
Credit score:
Check in on your credit score 2-3 times per year. Request your free report or use Credit Karma to monitor and get direct push updates when something has changed about your score. Remember though — there are no awards or even benefits to getting a perfect credit score. Anything over about a score of 730 gets you access to the best offers and rates.
Savings rate:
Evaluate your savings goals and figure out what you’re working toward. Figure you your savings rate by dividing what you save by your take home pay. Ideally you’ll be saving at least 20% of your take home pay. If your savings rate isn’t there yet, work towards it. Set a target twice a year and monitor your progress monthly (around when you get your monthly statements.)
Tax planning:
Ideally you’ll think about taxes twice a year. Once in the fall to look at income sources and withholding for the year. This is how you can make sure there are no surprises when you file taxes and to take advantage of ways to save taxes for the year. Then, once during/after you file taxes to review last years’ tax situation and consider how the current year will be the same/different.
Things to Check in With Annually
Retirement contributions:
Check in and evaluate once a year in January or when you get a raise. Ideally you work toward maxing out according to the current federal maximum ($20,500 in 2022) and not just stop when you get max out the employer match. As you’re working toward the federal maximum, share 50% of each raise with your retirement fund (i.e. your future self).
Retirement planning and projections:
Once you reach age 50 — you should definitely look at your retirement projections annually (unless you plan to retire earlier than “normal” retirement age). Before that age — it’s smart to check in annually as well. But if this is something that feels stressful or not a high priority — you can check in every 2-3 years on your projections.
Rebalancing:
Once per year you should evaluate your investments and consider whether your portfolio needs rebalancing. Typically in any given year the allocation to various assets will have shifted. So it’s important to rebalance to get you back to your intended strategy. Sometimes this can be accomplished automatically with your 401k/403b provider. For other types of accounts like IRAs, ROTHs, or taxable brokerage accounts you must do this manually.
Net worth:
Measure everything you own and everything you owe. Subtract one from the other and you have your Net Worth. This number should grow annually — so check once per year and make sure you’re on track. Some people measure this more frequently, but it can be overkill. This is because watching short-term fluctuations in your retirement and investment accounts may take you away from what’s important: living the life you want to live today while also saving for your future self.
Education funding:
If you’re saving for college for your children or yourself, you don’t need to monitor these account like a hawk. Make sure you’ve thought about your savings rate to these accounts and check your progress once per year.
Student loan repayment:
If you’re paying back student loans — don’t pay them off in the background without evaluating the rates you pay and your situation at least once a year. Congress and the Department of Education make changes to the federal student loan programs from time to time and rates can also increase and decrease. The choice between staying on the federal repayment program and refinancing to private student loans should be evaluated based on your age, income, and profession. It’s also nice to check in at least once a year to see positive progress paying down the loans. Or, if you’re planning on public student loan forgiveness, you must re-certify your income and non profit/government status once a year.
Home mortgage rates:
Review at least annually. In a rising rate environment you won’t likely make any changes. In a declining rate environment you may consider whether to refinance once every 6 months. Products and options are changing all the time so the situation last year may be different from this year.
Employee benefits and healthcare:
Update this once a year during open enrollment. The federal maximum for FSA, HSA, and dependent care can change each year. Plus you’ll want to think about your health care status and needs when evaluating your health care plan choices.
Things to Check in With less Frequently
Car insurance and umbrella liability insurance:
Price shop and review coverages every two or three years. Definitely compare providers when you price shop and evaluate how your coverage needs may have changed.
Home/renters insurance:
Price shop and review coverages every two years. Definitely compare providers when you price shop. But more importantly, update your dwelling and personal property coverage. The cost to replace your things or rebuild your property changes each year with inflation / improvements you’ve made.
Life insurance:
Check that the amount of your life insurance is appropriate every 1-2 years or update if you have a life change such as a marriage, divorce, kids, etc. The amount of life insurance you need typically declines as you age because you have other assets your beneficiaries can draw from if something happened to you. However, when you’re younger your need for life insurance is highly dependent on whether you own property and whether someone else relies on you for income.
Will and estate planning documents:
Once you have a Will, Power of Attorney, Medical Directive and consider whether a trust makes sense for you — it’s a good idea to check your documents and consider updating once every 5 years or when you experience a life change such as a marriage, divorce, death, kids, etc.
