Your financial wellness checkup, in five steps

Life events aren’t the only reason for you to think about and take control of your money. An annual financial wellness check-in can help you understand what’s working, what’s changed, and where you might want to adjust. A step back—to review goals, spending, debt, and savings—may just help you build confidence, too, for both short-term and long-term financial goals. Here’s how to get started.

We set financial goals for all sorts of reasons, from retirement dreams to saving for a house and responding to stock market ups and downs. Those goals—recent or ongoing—serve as good first steps to help assess your financial wellness. (Want some help setting or refining your goals? This worksheet can help.) Then, answer these questions: 

• Can I cross off any goals from my short-term list? 
• What steps did I take toward my mid- and long-term goals? 
• Do I have any new goals? 
• Should I adjust any current goals?

A budget is simply a tool to help track money in and money out. But while setting and sticking to a budget might seem hard, it pays benefits beyond a balanced account: 44% of gen Zers and millennials who focus on financial wellness report an improvement in quality of life. 

If you’ve already embraced budgeting, your financial wellness check-in can focus on whether you’ve been able to maintain your budget or need to adjust. If you still need to formalize a budget, all sorts of tools can help, from apps to worksheets. If you’re not sure how to build your budget, or you want to re-evaluate your spending habits, consider the 50/30/20 rule. Here’s how it works: 

• 50% of your money goes toward your essential living expenses, like rent or mortgage payments, utilities, and groceries. 
• 30% goes to the more “fun” expenses that help you enjoy life, like eating out at a restaurant, vacations, shopping, and streaming subscriptions. 
• 20% goes toward savings, including emergency funds, retirement funds, investments, and IRA contributions, plus paying down any debt. 

As with any guidelines, if using the 50/30/20 rule, it’s not set in stone. If you go over budget in one area, you can always reduce spending in another category to balance out.

Start with a debt comparison: How much debt did you have at this time last year, and how much do you have now? The goal is to reduce the number from year to year, if you’re able. If you’re not sure how to tackle debt, these three common debt payment methods might help: 

• Snowball method: Motivated by seeing a smaller balance disappear quickly? Try the snowball method: Pay off the account with the smallest balance first and move on to the next lowest, eventually working your way up to the account with the highest balance. 
• Avalanche method: Want to pay less interest on your debt? Try the avalanche method: Pay off the account with the highest interest rate first and move on to the next highest. With this strategy, you prioritize accounts with high interest rates, so you pay less over the life of your debt. 
• Consolidation method: Need to focus on only one account? Try the consolidation method: Combine all your debts into a single account with a single payment. You may be able to get a lower interest rate on your single account. When you understand how much you owe, it may be easier to plan and pay off debt.

At least a couple of times a year, try to review all your investment and savings accounts. That includes mutual funds, stocks, retirement accounts, and IRAs. It can help ensure you’re saving enough to make progress toward your goals and that your information is up to date. Here’s how: 

• Review your accounts online. Make sure you’re signed up for online access to your financial accounts. 
• Strengthen your online security to help prevent fraud and quickly alert you to suspicious activity. You can: 
  • Choose a complex password 
  • Enable a passkey—such as facial recognition or a fingerprint 
  • Sign up for e-delivery of documents, if available. (See below for instructions on how to do that with tax documents for your Principal^® accounts.)

• Ensure your information is up to date. Review personal details, such as address and email. 
• Update beneficiaries. This is especially important with big life changes, such as marriage, so that your savings benefit those you love. 
• Rebalance investments. Your original investment risk may change over time as some investments may grow faster than others. Some accounts may rebalance automatically; if yours does not, rebalancing re-sets the asset allocation back to its original mix. 
• Check contributions to your employers retirement plan. An increase in contributions, even a percent or two each year, can help you build momentum toward your retirement savings goals. If a match is offered by your employer, increase contributions to get the full match. It’s like free money.

Part of financial wellness is concrete planning for what might happen, and dreaming for the future, too. 

• Start or boost your cushion for unexpected costs. A good rule of thumb for an  emergency fund is to work up to enough savings to cover three to six months of expenses. 
• Are you planning to help someone with an education expense? Consider setting up a 529 plan, an educational savings option. Contributions may have tax benefits and withdrawals are tax-free if used for qualified education expenses.