It’s time to give your money a financial health check – here’s how

What is a financial health check?

Regular health checks are a crucial part of everyday life, and finance is no exception. With the current cost of living crisis in full effect, there’s no better time to ensure you are in complete control of your outgoings. But how do you do this? What exactly is a financial health check?

To put it simply, a financial health check is a review of your personal finances. It’s time to assess your money management, understand where you are with your financial goals and take note of areas that need to be improved or changed. Spending time on a financial health check can pay dividends, but it can feel hard to fit in to an already busy life. The good news is that taking the time just twice a year is ideal, with the beginning and the middle making ideal checkpoints.

Why not get the ball rolling now? We’re here to help you get started with our practical tips and advice on how to keep you on track with your next financial health check…

Review your spending

Though you can’t stop paying for things like your electric bill or your car insurance, you can make sure that you’re getting the best deal possible.

You can save a good chunk of money by reviewing your monthly outgoings and switching up the payment packages you already have - such as broadband, utility, mobile, TV and important insurance products.

With so many options out there, picking the right provider can be an overwhelming experience so, to ensure that you’re getting a good deal, why not use a comparison site like MoneySuperMarket Link opens in a new window? Breaking down the options and having a clear comparison will really help you in ironing out your decision.

And if you own your own home, there’s another option to consider: remortgaging. Whether you’re coming to the end of your current deal, eager for a better rate or you’re worried about interest fees going up, remortgaging with a better deal could be a great way to save a nice sum of money.

Cut back where you can

Budgeting is never an easy task - but it is a necessary one. Cutting back on non-essential spends can be one of the most beneficial ways of building up your savings. You can start by simply looking at your recent transactions and prioritising what was worth spending the money on and what wasn’t. Could that daily Pret be substituted for lunch made at home? Was the impromptu shopping spree worth the additional spend, or would you rather see a healthier savings account?

It’s all about compromise. If you combine all the unnecessary purchases together, you’ll be able to calculate just how much more you could save - and you may be surprised by the result.

Get ready for a rainy day

Once you’ve reviewed your spending, cut back on some non-essentials and only if you have the means to do so, why not set aside some savings for when the going gets tough?

A rainy-day fund can help reduce financial anxiety and act as a safety net for unexpected expenses, such as emergencies or repaying your overdraft. Overwhelming overdrafts, sky-high credit card debt and high-interest loans are examples of the kind of compromising situations you could find yourself in if you don’t have some savings set aside. Without any savings, it can be all too easy to get deeper into debt.

Having a goal makes everything easier to achieve, so the first step you’ll need to take is to calculate how much you’ll need to save and deposit into a savings pot Link opens in a new window. For a rough calculation, simply add up your monthly outgoings and see how much you have left over as disposable income. Once you’ve done that, you can then realistically see how much you’ll be able to feasibly set aside each month for your rainy-day fund.

Then, all you have to do is add together all your essential outgoings and decide on a savings goal to work towards.

For example:

• Your monthly income is £1500
• Pick a goal of saving 2 months’ worth of essential expenses
• Your essential expenses are on average £1000, so your goal would be £2000
• If you add £200 to your savings pot each month, you’ll be able to reach your goal within 10 months
• You’ll still be left with £300 a month for disposable income

Keeping good financial health

We’ve already detailed the effectiveness of setting a savings target, plus monitoring your spending - but what other ways can you keep good financial health?

• Become transfer happy on payday. The best time to transfer money into your savings account is when your bank balance is at its healthiest, so payday is the best day of the month to reshuffle your finances. Don’t let the extra money that could go into your savings account linger in your current account too long - detaching yourself from it as soon as possible will help deter you from spending it.
• Is your Amazon Prime Video subscription used only a startling once a month in comparison to your daily Netflix binge? Cancel unused subscriptions or cut back on the quantity you pay for.
• If you can, pay off any outstanding loans/credit card debts - by doing so on time, you’ll reduce your risk of getting into further debt and allow your credit rating to remain stable, or even grow.

• Download a mobile banking app - it’s the easiest way to have visibility of your finances on a daily basis. With there being so many mobile banking apps out there, it’s important to opt for one that can actively help you save with useful budgeting features. A perfect example of this would be Virgin Money’s mobile banking app Link opens in a new window. From tagging and tracking transactions to creating budgets for controlling your spending to setting up balance and transaction alerts, you have a host of options at your disposal that help ensure your financial health remains stable.

What to do in financial hardship

Things don’t always go to plan and if you find yourself struggling after your financial health check, don’t give up hope - there are things that you can do to help ease your struggles:

• Jot down your financial commitments in order of priority and review your spending - what is absolutely essential and what can be cut down even further?
• Steer clear of loans and try not to frequently use credit cards - if you’re struggling, you can end up falling into a bad spiral of debt if you continuously use these as ill-perceived safety nets.

• Know what you’re entitled to - you may be eligible for various benefits Link opens in a new window from the government, even if you work.

• Speak to a debt advisor - experts in debt will be able to provide you with personalised advice for your situation. There are a number of reputable companies for you to decide on, including Turn2Us Link opens in a new window and Citizens Advice Link opens in a new window.