Financial Health
March 23, 2022

5 steps to healthier finances

Sitting down once a year to complete a financial health checkup can keep you on track. Use these tips to assess your credit score, spending habits, budget, savings plan, and health insurance coverage.

A doctor stands listening with a stethoscope next to an oversized piggy bank.
Financial Health
March 23, 2022

5 steps to healthier finances

Sitting down once a year to complete a financial health checkup can keep you on track. Use these tips to assess your credit score, spending habits, budget, savings plan, and health insurance coverage.

Most of us understand the importance of going to the doctor to check on our health each year — but do you also check your financial health? It’s crucial to periodically take a good look at your finances “to see where you are, what needs to be tweaked, where you need to pivot, and maybe some things you need to let go,” said Marsha Barnes, personal finance expert and founder of The Finance Bar. She explained that doing a financial health checkup at least annually gives clarity and establishes a firm financial foundation for the months and year ahead.

How to perform your checkup

First, mark time on your calendar. Barnes suggests two hours for the initial review, and another two hours later to comb through the things you need to work on and to create an action plan.

She recommends examining five key areas — credit score, spending habits, budget, savings plan, and health insurance — to make sure your financial health is on track.

A woman sits in front of a laptop. The words around her head are credit score, spending habits, budget, savings plan, and health insurance.

1. Examine your credit score.
You should understand not only what your credit score is, but also what that number means. “Having a good credit score is foundational for your financial health and achieving your financial goals,” said Eddie Queen, Wells Fargo’s head of Financial Health. He explained your credit score will impact both your eligibility for credit and the pricing you get when you borrow.

Wells Fargo’s Credit Close-UpSM is intended to help customers understand and improve their credit. The service provides Wells Fargo customers with access to their FICO® Score 9, credit score history, tips for enhancing their score, and a full Experian credit report.

2. Evaluate your spending habits.
Print or download your last three months’ banking and credit card statements to see your spending habits. “You can do something very simple like highlight everything you needed to spend money on in yellow, highlight in a different color nonessential spending, and highlight unplanned spending in a different color,” Barnes said.

To avoid mindless and wasteful spending, Barnes recommends adopting value-based spending habits. Rather than “spending on things you like, spend on things you love — things that are deeply important to you at your core.”

Also take a look at how you’re using credit cards.

Barnes recommends using one or two cards with features that are important to you. Cards like the Active Cash Visa® Card — which offers unlimited 2% cash rewards on purchases — are a great option for reward seekers. “It’s one of the most competitive cards in the marketplace today,” said Krista Phillips, Wells Fargo’s head of Branded Cards and Marketing. Indeed, The Ascent, NerdWallet, and WalletHub all call it the best cashback card of 2022.

For those seeking rate value, the Reflect Visa® Card offers a low introductory APR for up to 21 months. It was created for customers concerned with interest rates and who tend to carry a balance. “If we think about meeting the needs of all of our customers,” said Phillips, “we are really thoughtful and deliberate about where we’re going to play — so cash rewards and value cards.”

Finally, plan for bigger expenses. Barnes suggests using sticky notes with Q1, Q2, Q3, and Q4 written on them, then jot down something you want to focus on financially for each quarter.

“It could be something really fun that helps you clarify what themes or experiences you or your family want to have this year that will take financial means,” Barnes said.

3. Review and adjust your budget.
Evaluate whether your budget still aligns with short- and long-term financial goals. “Revisiting your budget on a consistent basis holds you accountable while also responsibly managing your funds,” Barnes said.

If you’re not currently using a budget, do an online search for a simple budget template to get started.

“If you feel like you’re not able to really stick to a budget or your debt is just not going down, the first thing you definitely want to do is to track your habits,” Barnes said. Write down your daily spending, and consider noting the emotion you feel when spending so you can identify your spending triggers.

4. Evaluate your savings plan.
Take a deep dive into your savings goals. Barnes advises creating an actionable plan to implement throughout the year.

“Knowing where you currently are and considering where you would like to be creates a clear path to achieving savings goals,” Barnes said. It can also enhance your financial confidence should an emergency arise.

If you have a goal (such as saving six months’ worth of living expenses) that you haven’t been able to achieve, start automating your savings, Barnes said.

5. Evaluate your health insurance coverage.
“I can’t stress this enough: Take the necessary time to review any life changes from the previous year and adjust your health insurance accordingly,” Barnes said. If you have insurance with your employer, comb through what coverage you currently have compared to any coverage you think you need.

Ensuring you have the proper insurance coverage in place could avoid hefty medical bills or out-of-pocket expenses. Also update life insurance, if needed.

Next steps

After completing your financial health checkup, establish steps to get yourself on track — whether your goal is to adjust spending to stay on budget, pay off debt, reduce credit card usage, or save for a large purchase.

Barnes suggests reading a personal finance article every week, if not daily, to boost your general personal finance knowledge.

“The more that you read and digest financial information, the more it sticks and the better you get,” she said.

You can complete an annual financial health checkup at any time. A good way to remember is to plan for it the next time you schedule an annual doctor visit.