Review Your Personal Finances

An annual review of how you’re doing is surprisingly helpful and surprisingly painless.

By Gary Foreman


An annual review can be helpful for your financial life. You should evaluate some things on a regular basis, and it's also a good idea to look at your own performance periodically.

Most of us have some areas where we could do better if we're willing to make minor changes. To perform an annual review of your personal finances means you will be reviewing yourself. If you don't like the score you get, you'll know exactly where to go to complain!

Have you reviewed your auto insurance within the last year? As your cars and family grows older your needs will change, you might find a better rate by shopping around. [Score: 3 points for checking for appropriate coverage and comparing rates; 1 point for checking either; 0 points for thinking that your brother-in-law the insurance agent is taking care of it.]

Have you reviewed your homeowner's insurance in the last two years? While not as likely to change as your auto policy, homeowner's coverage still needs to be reviewed periodically. [Score: 3 points if you reviewed it this year. 1 point if you reviewed it the year before. 0 points for thinking that you only need to look at your homeowner's policy when you buy a new home.]

How much money do you owe? An easy way to measure your economic well-being is to see if you owe more or less money than you did last year. [Score: 3 points for reducing your total debt by 10 percent or more. 2 points for reducing it by 5 to 10 percent. 1 point for reducing it by 1 to 5 percent. 0 points if it remained the same. Minus 1 point if the amount you owe went up.]

How is your debt structured? Generally borrowing to buy something that will hold its value (like a house) isn't as bad as borrowing for something that will be gone long before the payments are (like a pizza). [Score: 3 points if you don't owe any money to anyone. 2 points if you only owe money on your home. 1 point if you owe on your house and car. 0 points if you owe on a credit card or personal loan. Minus 1 point if you owe money to everyone in your office.]

Did you add to your retirement savings last year? Each year brings you that much closer to retirement. And, the magic of compounding means that a dollar saved for retirement in your 20's is much more valuable than a dollar saved in your 50's. So every year counts. [Score: 3 points if you saved 4 percent of your salary or more last year. 2 points if you saved 2 to 4 percent of your salary. 1 point if you saved 1 percent of your salary. 0 points if you didn't add anything to your retirement accounts. Minus two points if you borrowed from your retirement plan last year.]

Have you reviewed your investments in the last year? You don't need to be a Wall Street wizard to know that today's investment climate changes quickly. That means that you need to look at your investment position regularly to see if adjustments are required. It's tempting to focus on whether you made money since your last review. Yes, that's something that you should check. But, the more important question is are you positioned for the future? Do you need to make any changes now? [Score: 3 points if you reviewed your investments at least once each quarter. 1 point if you reviewed them at least once during the year. 0 points if your account statements are stacked on your desk waiting for you to look at them.]

So how did you do? If you scored 15 or more you really have things under control. You're probably only reading this because it's after-hours and you can't call your broker or insurance agent at this time!

A score of 10 to 14 points indicate that you're trying, but still need a little work to be a personal finance pro. If you scored between 5 and 9 points you probably need to pay more attention to your finances. And if you scored less than 5 points make sure that your rich uncle has included you in his will. You'll need the cash!

Gary Foreman is a former certified financial planner who currently edits The Dollar Stretcher Web site .