Jagdish Kale
No book gives you a ready answer to whether your 'financial health' is good or not, and no financial advisor can guarantee your 'financial health'. But if you ask yourself eight questions and find honest answers to them, you can get an accurate estimate of your financial status and can make many future decisions without any effort.
Just as everyone's financial needs are different, so is everyone's idea of ​​financial prosperity. For example, the financial needs of a person living in a small village are different from those of a working person living in a metropolis. Similarly, getting a big salary every month, saving a lot of money every month, taking health insurance or term insurance as needed, repaying the loan on time, even if all the things are going well, this cannot be a criterion to say that you are financially prosperous. According to experts, every person can assess their financial status by asking themselves a few questions. Let's take a look at these eight questions…
Saving 20-30 percent of monthly income?
Try to save 20 to 30 percent of your monthly income every month. If there is not a good amount in the savings account at the end of the month, recognize that this is a negative situation in terms of future financial planning.
Does the income increase every year?
Don't measure your financial growth in just one year. Instead, compare the situation today with the situation two or five years ago. Whether your financial graph is increasing or not, it can be identified from two things. The first thing is whether the savings or investment is getting the right rate of interest or return. Another criterion is whether your investments or savings are growing at the rate at which your income is growing.
How dependent on credit cards?
There is nothing wrong with using a credit card; But it is not advisable to rely entirely on credit cards. If someone took away all your credit cards today, would you be able to go through life without them? Some take personal loans along with credit cards and have to pay 'EMIs' for loan repayments. This is not a good sign for financial health.
Have you taken an insurance policy as needed?
Along with basic insurance policies like life insurance, term insurance, health insurance, have you insured your loan? When taking large loans like home loans or car loans, it is very important to insure these loans. For example, suppose you arrange the down payment of a home loan; But if you are unable to pay the monthly installment due to some reasons, in such a case it is necessary to insure the amount of the loan.
Are funds raised for emergency situations?
A sound financial outlook is essential to combat future crises. Better to have an 'emergency fund' for that. By building such a fund, you don't have to break your savings accounts in times of crisis. Moreover, emerging emergency fund is also a good option to protect your investment from the impact of inflation. This fund should have an amount equal to your expenses for three months. Anyone can build such an emergency fund by controlling some of their expenses and saving a little. Withdrawals from long-term investments during times of crisis can cause you to lose money by reducing returns.
Is the return on investment proportional to inflation?
Inflation rate is always increasing. A return on investment at this rate is essential. For example, fixed deposit option is considered best for long term investment. Because there is a fixed income on it; Also the market condition has no effect on this investment; But investing in fixed deposits in the long term is not suitable for you as the interest rate earned on fixed deposits is lower than the rate of inflation. Therefore, considering the rising inflation, it is better to choose the investment option only after taking care that the rate of return will be higher than the rate of inflation.
Are you burdened with more debt than you can afford?
It should be recognized that the more share of your income you spend in the form of loan EMIs, the weaker your financial health. Be careful not to spend more than forty percent of your income on loan repayments. By doing this, you will be able to manage your household expenses in the long run.
Is a financial target set?
While saving for the future, it is important to make sure what is your future financial goal and save for that. For example, if in five years you want to own your own house? Do you want to pay off all your debts by a certain year? Do you want to plan to get a salary of forty thousand rupees per month after a few years? Do you have future plans to start a business alongside your job? Ask yourself these questions. Before saving or investing, the intention behind it should be clear.
