Investigate Your Finances in 5 Easy Steps

Playing detective can give you a great snapshot of your money

Karen Cheney,

AARP

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Published March 21, 2025

a bulletin board with money, credit cards, bills and other money-related objects

You don't need a private investigator to solve the mysteries wrapped up in your finances — just the right mindset and the right questions.

Doug Chayka

If a private eye were assigned to uncover the state of your financial health, how would that gumshoe proceed? Picture Sam Spade, Hercule Poirot or Easy Rawlins at a desk, sifting through the evidence: bank statements, credit card bills, insurance policies — each one a potential clue, each one whispering a story waiting to be heard.

Sam, Hercule, Easy or some other fictional detective would scrutinize every line item, every transaction, mulling over one question after another. Where’s the money going? What’s being overlooked? The truth would be in the details. And, as in any great whodunit, sometimes the most revealing clues would be ones that the shamus wasn’t even looking for.

Fortunately, solving the mysteries wrapped up in your finances doesn’t require a private investigator — only the right mindset and the right questions. To crack the case, start here.

Cash flow: Where is your money really going?

Signs of shaky cash flow might be hiding in plain sight: unsolicited credit card offers, letters pitching personal loans, or a growing stack of mail you put off reading. “When we ask people what their current bills are, we can hear the envelope being torn open,” says Martin Lynch, president of the Financial Counseling Association of America.

Even if these red flags don’t apply to you, it’s still wise to analyze your cash flow. To get an idea of your spending, gather your last few months of bank and credit card statements, suggests Kristin Thompson Poelker, a financial planner with Renaissance Financial in St. Louis. Next, highlight all your income sources, including side gigs or rental income. Your most recent tax return should help. The sign you’re looking for: spending less than you bring in. If you’re still working, aim to allocate at least 15 percent of your income to savings, says Thompson Poelker.

Finally, look at your free credit reports, now available weekly from each of the three major credit bureaus via AnnualCreditReport.com. Besides the score (670–739 is generally considered good), look at your utilization ratio — the percentage of available credit you are using. To calculate that among your credit cards, divide your total outstanding balances by your total credit limits and multiply by 100. For example, if you owe $5,000 on a $10,000 limit, dividing $5,000 by $10,000 gets you 0.5; multiplying that by 100 gets you 50 percent. Below 20 percent is ideal.

Insurance: Do you have the right coverage?

Insurance is a shield against life’s unexpected plot twists, but are you paying too much or leaving yourself underprotected? Start with your auto and homeowner's policies. You should know your premium, your deductible and your total coverage amount for each. Try to recall when you last compared rates. “Shop around for premiums every year or two to ensure you’re not overpaying,” says Jeremy Zuke, a financial planner in New York City.

Zuke also suggests avoiding deductibles as low as $250 or $500, which rarely justify filing claims due to the potential impact on premiums. Instead, aim for deductibles of $1,000 to $2,000 for auto insurance and $5,000 for homeowners insurance, assuming you have a sufficient emergency fund in place. For liability, consider increasing your auto coverage to $300,000 to $500,000, instead of the minimal $100,000.

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Also consider the financial impact of a one-way trip to the morgue. For some households, life insurance is essential to protect against lost income, says Jason Williams, a financial planner in McLean, Virginia: “But if you’re no longer working, the need may disappear.”

If your life policy’s cash value is diminishing because it’s subsidizing your premiums, Zuke recommends consulting a professional to determine whether to keep it, surrender it or sell it to a life settlement company.

Cash at the ready: Are you prepared for the unexpected?

Any detective worth her salt knows you need an emergency stash. But it’s not enough to have one. You need the right size and location too.

“An emergency fund should cover three to six months of expenses in liquid cash — not locked away in CDs,” says David McClellan, a financial planner in Chicago. “Three months is fine if you have more secure income, but for less stable incomes, aim for six.”

Next, inspect where your funds are parked. Too much emergency savings languishes in accounts earning only 0.1 percent interest, McClellan says. “There’s a wide range of banks now offering yields of 4 percent or more,” he says. “If you’ve got $2,000 or more in emergency savings, that extra yield makes a big difference.” You can unearth savings account offers on sites like DepositAccounts.com or Bankrate.com, or by searching online for “high-yield savings” at FDIC-insured banks.

Investments and income: Will your money go on the lam?

The Social Security Administration estimates that if you’re a 55-year-old man, your expected lifespan is about 82½ years; if you’re a woman, it’s nearly 86. But if you want your retirement kitty to stick around, you may come up short if you rely on that average figure. “There’s a 50 percent chance you’ll outlive that number,” McClellan says. “Plus, advances in technology and medicine are likely to extend lifespans in dramatic ways.” To avoid running out of cash, McClellan recommends that a single person plan on living to 95, unless current health or chronic conditions suggest otherwise, and that couples plan on at least one of them living to 95 in any case.

For retirees, maintaining some investments in stocks is essential. “Most of my retired clients have portfolios with 50 to 60 percent in diversified stock mutual funds or exchange-traded funds,” McClellan adds. “This allocation provides a high enough expected return to stay ahead of inflation, helping them maintain or even grow their purchasing power.”

The solution to investing puzzles can be deceptively simple. Many people accumulate a confusing array of mutual funds and stocks when a stripped-down approach may be better. Zuke recommends starting out with three core funds: a U.S. stock index fund, an international stock index fund and a bond fund. He also advises reviewing investment fees on Morningstar.com, aiming for funds with annual fees below 0.2 percent.

If you haven’t yet claimed Social Security, comb through your benefits at ssa.gov. Williams suggests reviewing your earnings history and estimating your benefits at various claiming ages. For married couples, coordinating claims can maximize your combined benefits. As with any investigation, it pays to study the details before you act.

Estate planning: Is your will as sharp as your instincts?

A final clue that your finances are healthy is an up-to-date estate plan. “Have you reviewed it in the last three to five years?” Williams asks. If not, you risk leaving your heirs with a mess.

At minimum, you need a will, powers of attorney and a living will, says Zuke. You must also ensure that people close to you know that these documents exist and understand your wishes.

Options for creating a plan include online services like FreeWill, LegalZoom and Trust & Will*, costing up to a few hundred dollars, and group legal plans through work, which often are around $10 a month and can include wills. For a more tailored approach — appropriate if you have complicated finances or family relationships — hiring a local estate attorney will likely cost a few thousand dollars.

Finally, double-check account titles and beneficiary forms to ensure they align with your intentions. For example, if you want certain assets to pass to your spouse, consider holding the relevant accounts jointly. Frank F. Previti, a CPA who is certified in financial forensics, advises maintaining a comprehensive list of who has access to your accounts — a critical document for heirs. “Some people grant online access to their accountants or tax preparers. You need to monitor that list like you would your beneficiary forms.”

In sum, the clues to your financial health are right under your nose. All you need to do is examine them closely and, as Hercule Poirot has said, “Use your little gray cells.”

*Trust & Will pays AARP a royalty for use of its intellectual property and provides a benefit to AARP members.