The Financial Health Check-Up: How to Audit Your Money in the New Year

A New Year is the perfect time to give your finances a thorough check-up. Just like you visit a doctor for a physical or take your car for maintenance, auditing your financial health ensures that your money is working for you and that you’re on track to meet your goals. By identifying what’s working, what’s not, and where you can improve, a financial health check-up sets the stage for a prosperous year.

In this guide, we’ll walk you through a step-by-step process to audit your finances, make adjustments, and create a roadmap for financial success in 2025.

Why a Financial Health Check-Up is Essential

A financial audit helps you:

Identify leaks or inefficiencies in your budget.
Adjust your financial strategy to align with your current goals.
Ensure you’re prepared for unexpected expenses or opportunities.
Gain peace of mind knowing your finances are in order.

By starting the year with clarity and focus, you’ll have the tools and confidence to make better financial decisions.

Step 1: Review Your Income Sources

Understanding where your money comes from is the first step in your financial health check-up.

List All Income Streams: Include your salary, side hustles, passive income, and any other sources of revenue.
Check for Increases or Decreases: Has your income changed recently? If so, adjust your budget accordingly.
Identify Opportunities for Growth: Could you negotiate a raise, take on additional work, or create a new income stream?

Try This: Track your income for the last three months and calculate your average monthly earnings.

Step 2: Analyze Your Spending Habits

Take a close look at where your money is going. This step often uncovers surprising insights.

Categorize Your Expenses: Divide spending into essentials (housing, utilities, groceries) and non-essentials (dining out, entertainment).
Spot Patterns: Are there categories where you consistently overspend? Identify areas to cut back.
Calculate Discretionary Spending: How much of your income is spent on wants vs. needs?

Try This: Use a budgeting app like Mint or PocketGuard to automatically categorize and analyze your spending.

Step 3: Audit Your Savings and Investments

Your savings and investments play a crucial role in your financial health. Ensure you’re on track to meet your goals.

Check Emergency Fund Levels: Do you have 3–6 months’ worth of living expenses saved?
Review Retirement Contributions: Are you contributing enough to your 401(k), IRA, or other retirement accounts?
Evaluate Investment Performance: Assess your portfolio’s performance and diversification.

Try This: If you’re not already contributing to a retirement account, set up automatic contributions to start building your nest egg.

Step 4: Assess Your Debt

Understanding and managing your debt is a critical part of a financial health check-up.

List All Debts: Include credit cards, loans, mortgages, and any other liabilities.
Check Interest Rates: High-interest debts should be prioritized for repayment.
Create a Repayment Plan: Use the snowball or avalanche method to tackle your debt strategically.

Try This: Focus on paying down one high-interest debt this month to reduce overall costs.

Step 5: Review Your Subscriptions and Recurring Expenses

Recurring expenses often go unnoticed but can add up significantly over time.

Make a List of Subscriptions: Include streaming services, apps, gym memberships, and other recurring costs.
Cancel What You Don’t Use: Eliminate subscriptions or memberships you no longer need.
Negotiate Rates: Call service providers to ask for discounts or better rates.

Try This: Audit your bank statements for the last three months to catch forgotten subscriptions.

Step 6: Check Your Credit Health

Your credit score is a key indicator of your financial health. Ensure it’s in good shape.

Get a Free Credit Report: Use AnnualCreditReport.com to access your report from the three major credit bureaus.
Dispute Errors: Report any inaccuracies to improve your score.
Pay Bills on Time: On-time payments have the biggest impact on your credit score.

Try This: Set up automatic payments for recurring bills to avoid late fees and protect your credit score.

Step 7: Update Your Financial Goals

Financial goals evolve over time, so it’s essential to reassess and update them regularly.

Revisit Long-Term Goals: Are you still on track for major milestones like buying a home or retiring early?
Set Short-Term Goals: Focus on achievable targets, like saving $500 in the next three months or paying off a credit card.
Create a Plan for Each Goal: Break down big goals into smaller, actionable steps.

Try This: Write down one short-term and one long-term financial goal and outline specific actions to achieve them.

Step 8: Create a Risk Management Plan

Financial health isn’t just about growing your wealth—it’s also about protecting it.

Review Insurance Coverage: Ensure you have adequate health, life, disability, and home/renter’s insurance.
Plan for Emergencies: In addition to an emergency fund, consider creating a will or updating your existing one.
Diversify Your Income: Building multiple income streams reduces reliance on a single source.

Try This: Schedule an annual review with your insurance agent to assess your coverage and make necessary updates.

Conclusion

A financial health check-up is a powerful way to start the year with clarity and confidence. By reviewing your income, spending, savings, debt, and goals, you’ll identify opportunities for improvement and create a roadmap for success in 2025. Remember, financial wellness is a journey—small steps taken consistently lead to big results.

For more insights on achieving financial health and building wealth, check out “The 20 Unbreakable Rules of Personal Finance” here.