You are driven to succeed. You save money. You actively invest in a retirement account. You read financial literature, yet you are still unsure if you will have enough to retire. Chances are, you are on the right track. Run through this checklist of ten steps to financial health and wealth to see if you are doing all you can to succeed.
Here are 10 steps to being financially healthy.Create a Balance Sheet
A balance sheet will show you exactly where you are now. In one column, make a list of everything you own. Include mutual funds, cars, cash, bank accounts, jewelry, etc. Then, make a list of everything you owe. Be completely honest. Include home mortgages, credit card debt, student loans, car loans, etc. This balance sheet will be your gauge of where you have been and where you are going. You can use this sheet to pinpoint which debt should be paid off first, and which savings account should be added to. You should update this sheet annually. A good time to update this sheet is when you are preparing your taxes each year.
Contribute to Your 401k
If your employer matches any amount of 401k contributions, invest this amount. Let’s say your employer gives you a 5% match on your contributions. If you give 5%, your employer gives 5%. You have already earned a 100% return on your investment. Regardless of your salary or credit card debt, you cannot afford not to take advantage of this opportunity.
Pay Off High Interest Credit Card Debt
Look at the debt you listed on your balance sheet. Rank debt from highest interest rate to lowest. Decide how much money you can put towards this debt each month. Make payments until this item is paid off.
Fund a Roth IRA
If you make less than $95,000 (single) or $150,000 (married), you are eligible to open a Roth IRA. You deposit after-tax money into this account. Once you are 59 ½ years old, you can withdraw funds tax-free.
Buy a Home
Stop paying rent. Buying a home allows you to put money into something that is your own. Most forms of mortgage interest are tax-deductible.
Build an Emergency Fund
The ideal amount of an emergency fund is different from person to person. Calculate your monthly expenses. Multiply this number by six. In general, this number is the amount you should have saved in an emergency fund.
Look Into Other Investment Opportunities
Once you have completed the above steps, start looking for other investment opportunities. These could be brokerage accounts, rental properties, antiques or certificates of deposit.
Invest in Yourself
Take time to invest some money into educating yourself. Is there a class or program that you could take that will lead to a promotion at work? Consider putting money aside for it.
Start a College Fund
If you have children, you may consider starting a college fund. Be sure that you are adequately saving for your own retirement before starting one.
Review Your Performance
Every quarter, have a meeting with yourself to check your financial plan. Are you saving what you should? Is your debt diminishing?
Author
Jessica Bosari is a long time personal finance blogger, writing about building wealth for asset management services company, K2 Technology.