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Give Yourself a Financial Checkup

How fiscally fit are you?

Your New Year Financial Health Exam

Chris O'Riley

Financial planners ask their clients these questions to determine if they’re in control of their money. Consider your answers, and then read about how to take your money medicine to cure what ails your financial health.

Do you have a will?

Yes, that’s a bummer of a leadoff question, but it’s one of the first that Ed Gjertsen II, past chairman of the Financial Planning Association, asks new clients. The answer, he says, hints at how organized your finances are. Dying without a will, he adds, leaves “a real mess” for your family.

Rx: An estate planning lawyer can write a will and related documents; expect to pay a few thousand dollars. Going DIY (say, via a website) costs less, but stick to your state’s rules for signing the will or it could be invalid.

How much credit card interest did you pay last month?

The perfect answer: “Zero,” of course. Annual credit card interest rates now average 16 percent, so carrying a monthly balance can gnaw through your money like a hungry beaver. 

Rx: Get motivated by math. Tell yourself you’re not repaying a debt; you’re making an investment with a guaranteed 16 percent tax-free return, says New York City financial adviser Gary Schatsky. That’s what you get when you no longer have to pay 16 percent interest on a debt.

If a tree fell onto your roof today, could you pay for repairs tomorrow?

Financial planners advise you to have money in the bank for medical care, layoffs or other crises. But only 48 percent of Americans have at least $2,000 in savings to cover such bills.

Rx: Divert a bit from each paycheck — for example, $25­ — into an emergency bank account (not your primary account). Ask HR to split your payroll deposit, making savings automatic.

Can you pass the seven-day cash challenge? 

Find yourself spending more than you make? Everyday food and fun purchases, for instance, can add up fast. Gjertsen tells clients to withdraw the cash they think they’ll need for the week and skip using plastic. “People invariably are out of money by Wednesday or Thursday,” he says.

Rx: A good way to start reining in expenses is to track discretionary spending. Use a spreadsheet or an online service such as Mint. 

How much of your income goes to retirement savings?

Advisers have formulas for how much money you’ll need to retire in comfort, but those can be “terrifying,” says Jill Gianola, a Columbus, Ohio, planner. Focus instead on saving now, likely your peak earnings years.

Rx: Aim to save 15 percent of your paycheck, Gianola says. If you can, opt for the extra “catch-up” contributions to your IRA or 401(k) that people 50 and older are allowed to make.