ok financially

How Do You Know if You’re OK Financially? A Money-Minded Checkup

By Debra Brede

It’s a strange situation: Many of us haven’t been to a doctor’s office in months due to the fact that our health is top of mind. Especially for those getting up in years, exposure to the coronavirus feels particularly risky, so we avoid public places like retail stores, restaurants, and even the spaces where we once sought care from trained professionals. We’re rethinking everything we do—how we work, play, shop, communicate, and more—and that includes our finances.

Faced with a turbulent economy and record job losses, so many people are questioning whether they are OK financially. As a wealth advisor, it’s a question I get all the time from clients, family members, and friends—but the frequency with which I’m asked seems to have ramped up in the past weeks and months. Of course, I know my clients’ financial circumstances in great detail, and we’ve taken pains to protect their assets in situations like the one we face today. Typically, a quick reassurance every once in a while is all they need. But when my phone rings and I find a concerned acquaintance, friend, or relative on the line, I run through a series of diagnostic questions—much like a doctor providing telehealth.

How do you know if you’ll be OK financially? Let’s do a quick, virtual checkup. If you haven’t yet considered any of the following items on the list, now is the time to start thinking. The goal is to put preventative measures in place to provide protection and avoid unnecessary losses down the line. Trust me, doing so will save you a lot of pain.

Have you been saving for a rainy day? When it comes to getting one’s finances in shape, the first suggestion I make is to build up an emergency fund: at least three to six months’ worth of cash that could cover your basic expenses if necessary. With so many folks out of work, facing furlough days, or simply unsure about what the future will hold, that emergency fund can be a real lifesaver.

If you haven’t built up these funds yet and you still have money coming in, start now. Don’t fret if you can’t stash away a significant amount each month. Every little bit helps, and sets you up to maintain your financial health if and when a new challenge comes your way.

Do you hold a diversity of assets? You have probably heard about the importance of diversity when it comes to your investments. But more than a mix of equities, bonds, and liquid assets, you should have a portfolio tailored to your particular situation.

Think of it this way: you wouldn’t just take someone else’s prescription medication, just because you have an ailment in common. You need a doctor to consider what will work for you—and that means taking into account your individual health history, allergies, and wellness goals.

Your advisor should maintain a similar approach, designing a portfolio that works for you specifically—one that is designed to maintain your financial health even when the nation’s economic prognosis is not good.

Have you considered what you want tomorrow? Contrary to popular belief, there are no hard and fast rules about how much you must save to have a successful retirement. Rather, you should be guided by what you want your retirement future to look like. For instance, maintaining a large home and lavish lifestyle in an expensive city will require a lot more money than footing the bill for a small condo in the suburb in which your children and grandchildren have relocated.

When you know what you want, you can plan accordingly—and determine whether you’re on track or whether you’ve got adjustments to make in the form of more saving or fewer expenses.

That concludes our brief financial physical, but it should mark the beginning of a more thorough evaluation—one you undergo yourself or under the guidance of a trusted professional.