In an ambitious world, working professionals and small business owners often dream of creating a significant enough financial standing and corpus that helps them live their desired life. But are you anywhere
close to being as money-healthy as you wish?
Here is an important six-step financial fitness guide that would help you answer this question for yourself and act accordingly.
How Fit Are Your Finances?
Start by asking yourselves whether your existing financial standing is enough to sustain the standard of living you want. Reassessing how fit your finances are will help you ascertain this and devise a plan that helps you fulfil your goals eventually.
Do You Have An Emergency Fund?
For any middle-class citizen, having an emergency fund is necessary to ride through life’s uncertain waves. An emergency fund acts as a safety net for unforeseen circumstances and downswings of life. A financially healthy individual would have six to twelve months of living expenses set aside in a savings account or liquid mutual fund to overcome an unexpected job loss or medical emergencies, helping you avoid debt in such times.
Is Your Insurance Cover Adequate?
Buying an adequate life insurance plan that provides coverage worth ten to fifteen times more than your annual income helps you protect your family even after you’re gone. Individuals are also advised to purchase a sufficient health insurance plan to cover the hospital costs without losing their entire savings.
Do You Manage The Debt Wisely?
Taking a timely loan with decent interest rates can help fulfil your immediate needs while also proving your creditworthiness. However, if your debt starts taking up a significant portion of your income, it signals a red alert. Financial experts advise individuals to keep their EMIs below 40 per cent of their monthly income and avoid long-term financial stress.
Are You Investing And Accumulating Wealth?
One sign of a financially fit individual is whether they invest a portion of their income and build on their existing wealth. Money experts suggest investing at least 20-30 per cent of your annual income in mutual funds, PPF or NPS to pile on your wealth via compounding interest and live a secure life.
Do I Have A Strong Retirement Plan?
How ready you are for your post-working life depends directly on the money corpus you are left with at the age of 60. Individuals need to have a strong enough retirement plan in place to retain their standard of living. Investing in beneficial schemes such as NPS, PPF and mutual funds helps you build a sufficient retirement corpus and be future-ready.
