3 Questions You Should Ask Yourself To Assess Your Financial Fitness

3 Questions You Should Ask Yourself To Assess Your Financial Fitness

Every year you go to your doctor to get your annual physical. Your doctor checks the health of your body by running several tests on your organs to make sure that you are completely healthy. Once you get a clean bill of health, you feel a lot better and are ready to tackle life’s challenges. The same rules should apply to your finances. You should examine your finances once a year and determine whether they are improving or belong in the sick bed.

Here are 3 questions that you should ask to assess your financial fitness level.

How is your debt level?

Becoming debt free does not happen overnight. It can take years of work to eliminate all of your outstanding bills. You can get discouraged if you judge your financial fitness by whether or not you are debt free. A better way of judging your debt level is by determining if your balances went down during the year. Do you have less debt entering 2011 then you did going into 2010?

If the answer to that question is yes, then give yourself a pat on the back. You are making progress. You can keep eliminating your debts by sending in payments that are greater than the minimum balance due. Even sending small amounts like 10 to 20% more than the minimum will reduce the interest owed and have your balance down to zero in no time flat.

Remember that slow and steady wins the race.

Is the balance on your retirement accounts going up or down?

Everyone knows that 2008 was a horrible year for the stock market. The stock market took a nosedive and portfolios lost nearly half of their value. The market did not completely bottom out until the spring of 2009. Your retirement account was probably awash in red ink during that time.

The last two years however have been a completely different story. From the summer of 2009 to the beginning of 2011, the stock market has risen rapidly. Your retirement account balances should be rebounding. Your portfolio should be up at least 20% from where it was during the crash. If your portfolio balances are not rising, you have to figure out why that is. Have you been dipping into your 401k too often? Are you afraid to invest because of the crash of 2008?

You are robbing yourself of your retirement dreams by not adequately finding your retirement account.

Have you restocked your emergency savings account?

Everybody knows about the importance of having an emergency savings account but lots of people don’t know about the importance of restocking your account once it is depleted. You probably needed to rely on your emergency savings account to help you survive the financial crisis. It could have been a job loss, home foreclosure, health problem, or some other major travesty that forced you to use your emergency savings.

Now that you are in better financial shape, you should start restocking your account. You can rebuild your emergency savings with as little as five to ten dollars a day. This is a simple pain free way to build up an emergency savings account over the course of a year.

Don’t get caught unprepared when the next financial calamity occurs. Start rebuilding your savings account today!