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How To Get Back to Basic Financial Health

by Mark P. Cussen

Overview

Financial fitness is as important as physical fitness or any other type of fitness. And getting your financial life in order can be every bit as difficult as getting yourself back into good physical shape after a long period of inactivity or illness. However, getting organized and having a plan can make this a great deal easier.

Step 1

Check your credit score on annualcreditreport.com and see what debts you have outstanding. Start by paying off the small debts first to get rid of them quickly, and then move on to the bigger ones. Pull your credit once a year to make sure that the debts you have paid off are no longer on your report.
Step 2

Open an IRA or Roth IRA to start saving for retirement. If you have a retirement plan available to you at your job, start participating in it now if you aren't already. If possible, at least participate to the extent that your employer matches your contributions.
Step 3

Assess the performance of your investments. Are you taking the right type and amount of risk, and are you getting a fair return on your money? If you don't know how to do this yourself, consult an investment adviser or stockbroker for a professional analysis.
Step 4

Assess your mortgage and see if it would behoove you to refinance. Consult a mortgage broker on this matter if you're not sure whether this is feasible. A lower mortgage payment can save you thousands of dollars over time, money that you can funnel into debt retirement or savings. But don't refinance just for the sake of refinancing; the terms of the new loan must justify the closing costs.
Step 5

Consult a tax adviser to make sure that you are claiming all of the income tax deductions and credits that you are entitled to. If you discover deductions or credits that you should have claimed in previous years, file amended returns to claim them if it's not too late. (You can file amended returns going back only three years.)
Step 6

Consult a financial adviser for a complete financial checkup. Find out if your investment objectives are realistic, how effective your current plan is, and what changes you need to make. A $500 fee for a comprehensive plan can make a huge difference in your investment returns and financial future.