Check your financial health in 5 easy steps

By Jennifer Rose Hale

It's no one's favorite appointment, but, if you value your health, you'll find yourself doing it once a year: the physical.

Being poked, prodded, tested -- face it, it stinks. But your goal is to emerge at the other end with good news from your doctor, or a plan for treating any problems that crop up.

Just like your physical, there are a few critical financial tasks that are best done once a year. An annual review of your finances can measure your fiscal well-being -- and identify areas that may need a little TLC.

1. Check your credit reports

Your credit report contains data that lenders review when determining whether they want your business. The bank financing your car loan, the firm considering your mortgage application, and possibly even your next prospective employer are all very interested in the data included in these reports.

These reports are critical, and the burden is on you to ensure they are accurate. Federal law allows you to request your credit reports for free from the three bureaus once a year through the website Don't be fooled by similarly named sites that try to sell you a credit-monitoring subscription in the process. Making a regular date to access your reports is a smart money move.

If a big purchase, such as a home, is in your future, consider springing for your FICO score from This number, which ranges from 500 to 850, is a grade cobbled together from your financial history and current status. It could mean the difference between a 3.75 percent interest rate, a 5 percent rate -- or no loan at all.

If your score is low, consider strategies to boost your FICO score.

2. Rebalance your investments

"Rebalancing your investments" may sound like the domain of millionaires or Wall Street traders, but it's a must for anyone who has money in stocks and bonds or even a retirement account through the workplace. Knowing what percentage of your contributions are going into what funds is a critical part of managing your retirement plans, no matter your age. (Unclear on investments versus other assets? Learn more about what an investment is--and what it isn't.)

An oft-cited rule of thumb advises making your stock percentage 100 minus your age--so, for a 25-year-old, stocks should be 75 percent of the investment allocation. A 45-year-old, however, should be somewhere closer to 55 percent in stocks.

3. Review your budget

If you do a monthly budget -- and, if you don't, you might want to start -- take a big-picture view of your spending once a year. It can be easy, on a monthly basis, to drop dollars here and there on eating out, paying texting charges on your phone or buying magazines at the store. But if you review your spending by category, you can identify the problems--too many magazines and not enough groceries, for instance.

Once yearly, perhaps during your spring cleaning or before gearing up for Christmas, is a perfect frequency for making big adjustments to how you spend and save.

4. Investigate your options for saving money

Hand-in-hand with putting your budget under the microscope, take the opportunity once a year to evaluate at least one category of expense or saving. Are you getting the best savings account interest rates? Is it time to search for a bank with fewer fees?

Moreover, look at the companies you're giving your money to. Are you getting the best possible deal on your insurance? Is your video-streaming service used enough to justify the cost? Does your cable-phone-Internet company have a cheaper bundle you can sign up for -- or does someone else?

Researching every expense at once can be overwhelming, so focus on one or two key categories a year.

5. Calculate your net worth

Your FICO score may feel like a sufficient grade of your creditworthiness, but another number to know by heart is your net worth. Calculate what you own: home or cars, if you have them, money in the bank and in investments, furniture and collections that have value. Then subtract what you owe: credit card debt, mortgages, car loans and student loans.

What number do you come up with? Is it positive or negative? If you have a mortgage or substantial student loans, you'll probably find it's negative. Commit the number to memory or write it down. Then commit to increasing your net worth by next year.

Whenever you undertake these tasks, whether as an end-of-the-year review or sprinkled through a 12-month to-do list, these financial tasks are just as critical to your financial health as that annual doctor's visit is to your body's.