Use This Expert-Approved 5-Step Strategy to Assess Your Financial Health Today

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It’s time for a check-up…of your finances.

Given all the non-stop depressing news about the economy these days, you might not be ecstatic about the idea of checking on your investments. But that’s all the more reason to check in on your status now, rather than later — because you’re not getting an honest assessment of where you stand, financially, if you only check in during the good times.

Katie Couric Media spoke with Jill Schlesinger, CFP, an Emmy Award-winning business analyst for CBS News, where she translates complicated business and economic news into understandable, relatable information for everyday viewers and listeners. 

Below, Schlesinger offers her five-step strategy for diagnosing your financial health today — without having a miserable time in the process.

Step 1: Calculate the resources at your disposal

The first thing you need to do, according to Schlesinger, is “calculate the resources at your disposal.”

“The word ‘resources’ can sound big and overwhelming, but it’s really just two things,” Schlesinger says. “It’s how much money you have, and how much money you make.”

To figure out how much money you have, consider these prompts: How much money do you have in your savings accounts? How much do you have funneled into other assets, like your car or your house? How much money do you have in your retirement account?

For how much money you make, consider these prompts: What is your current salary? If you work for a company, do you receive other types of benefits besides your income? For example: Do you have a company match for your retirement account? What about a flexible spending account? Is your company paying a big chunk of your health insurance?

You might think you know the answers to these questions…and yet, you could be surprised when you actually put pen to paper and get some concrete answers.

Step 2: Calculate how much debt you owe

The next step is to calculate another aspect of your financial life: all of your liabilities, which is a fancy way of saying all the money you owe.

“For most people, this includes a mortgage,” Schlesinger says. “Maybe it’s a line of credit you used for a renovation, maybe it’s a student loan for yourself or for your kid that you’ve absorbed — the fastest growing group of people who are accumulating student loan debt is grandparents, if you can believe it.”

You should also look into credit cards, car loans, and other forms of debt you might owe.

At this point in the exercise, Schlesinger offers up a crucial piece of advice: “Don’t freak out. All I’m asking you to do is put these numbers down on a piece of paper. That’s it. Don’t think about the numbers too much at this point. Just keep going.”

Step 3: Consider your housing situation

So we talked about the value of your home, but what’s the cost to maintain your home?

This is where step three comes in.

It’s time to analyze your housing situation. If you rent, how much are you paying monthly? Do you think your rental situation is stable? Why or why not?

If you own a house, how much is your house worth if you had to sell it? How much are your monthly costs? Is your house a money pit, when you consider heating costs and yearly maintenance? Or is it a steal, with a paid-off mortgage and low monthly costs?

“Considering your housing is so important,” Schlesinger notes, “because a lot of what we learned during the pandemic had to do with housing. People were realizing their needs were changing. More people work hybrid now, or want to live closer to their aging parents.”

In other words, your housing situation may or may not still fit the needs you had five, ten, or even fifteen years ago. It’s time to reassess and see whether your current home is — or isn’t — still working for you.

Step 4: Talk about your spending habits

“Step four is the most hated step,” Schlesinger warns. “Don’t hurt me, OK?”

Unfortunately, it’s time to talk about your spending habits.

“Spending habits are such a loaded topic because it really calls into question these choices that we’ve made,” Schlesinger says. “Let’s make one thing clear: I don’t want you to enter this process thinking, ‘I have to account for every nickel, and if I do, Jill’s going to tell me not to spend that money.’ You should really just view this as a fact-finding expedition.”

The point of this process is not to feel guilty about how much money you spend on eating at restaurants, and it’s not to figure out a way to spend less (at least, not yet). The point is simple: You need to figure out what your real expenses are each month, on average.

“Another thing that has happened from the pandemic is that people experienced a painful crash course of figuring out their priorities,” Schlesinger says. “Shelter, food, health care — those became the most important things, and everything else became, for most people, less important.”

Whether you have more money than you need or are currently feeling the pinch, it’s essential to understand your monthly spending habits so that you can decide whether they align with your long-term goals (like retirement), or whether they need a little, shall we say…adjustment.

Step 5: Reassess the obligations you’ve made to others

Here’s where it really gets tough: The final step in this process is to reconsider any financial obligation you’ve made to others.

“In many cases, obviously, this can be a hard one,” Schlesinger says. “Maybe you told your kids years ago that you wanted to help them pay for college, and now, for whatever reason, you don’t think you can or should anymore. That’s a big thing to dump on a kid. Or maybe you’ve made a commitment to your siblings that everyone is going to pitch in equally to help with mom and dad as they get older. That’s another big commitment.”

When you’re considering those commitments, it might be time to put a real dollar number next to each one. If you offered to help pay for school, how much are you covering and when will that happen?

By ironing out those details, you’ll likely find some clarity quickly: The commitment is either feasible or it’s not. And when you put the emotions aside for a moment and look at it logistically, you’ll likely be able to figure out which bucket it falls into almost immediately.

If you made an obligation you can no longer honor, you should tell that person as soon as possible, with as clear language as you can. Maybe you offered to pay your child’s tuition in full, but you can now only offer a third. Tell them this, and make sure to explain the reasoning behind this decision.

Once you’ve completed all of these steps, you’ll have a completely holistic view of your financial position — and you’ll have all the information you need to make the best decisions for yourself moving forward.