We all make it a point to visit a doctor for our regular health check-up. But do we give the same attention to our Financial Health? Mostly not! However, just like regular doctor visits, it is important to do your financial check-up at regular intervals.
Most people ignore this important aspect of their personal finance. They are either ignorant about the importance of good financial health or find it a daunting task. So let us simplify this and understand the meaning and importance of a good financial standing.
What Is Financial Health?
Financial health is a term used to describe a person’s financial situation. It tells you where you stand in matters of your personal finance. There are many factors that determine your financial health. Some of the factors include the amount of savings you have, your investments, your future expenses, the amount you have set aside for retirement, etc.
A positive net worth is when the assets you own such as cash, investments, home, vehicle, etc. are more than the liabilities you owe on these assets such as student loan debt, mortgages, loans, credit cards, etc.
Why Should You Care For Your Financial Health?
Every financial decision you take has an impact on your financial health. Just like a medical examination, monitoring your financial situation can help you identify strategies to improve your financial fitness and problem areas.
Young professionals today find it challenging to become financially strong. However, with good financial planning, one can achieve financial independence. Good financial health will allow you to look after yourself and your family, pay your bills and become financially independent earlier in your life. Poor financial health leads to high debts and overdue liabilities.
It will also prepare you for bigger future expenses. Like you know your air conditioner is on the last leg, your home needs a renovation, your son wants to go abroad for his higher studies, etc. In such situations, you can either use your savings or borrow loans at low EMIs. To avail loans, you will need to demonstrate to your lender that you have a good credit score and have assets and a steady income. This is nothing but an indication of strong financial standing.
A good financial health ensures a secured future. The cost of your children’s education, wedding expenses and medical emergencies are the major future costs for almost everybody. With a good financial plan in hand, you can sit back and relax. A good plan will take into account your current as well as future requirements and objectives.
Therefore give yourself a financial health check-up and we will tell you how!
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How To Check Your Financial Health?
You can check your financial position by considering the following factors:
- Check your credit score. A good credit score makes access to loans easier and cheaper.
- Analyse your current net worth. Net worth simply means your assets minus your liabilities. It will give you an idea of your current savings, investments and your debts.
- Build an estimate of your future income. You may have two income estimates, conservative and ambitious.
- Next, review your current spending pattern. Also enlist your major potential future expenses such as wedding, medical costs, kids’ education etc.
- Check if your future income will help you meet the planned future expenses.
- Make your retirement plans.
However, just reviewing your financial health is not enough. You also need to take steps to build up your financial strength. Refer to our blog articles to learn more about it.
The immediate step you can take right away is by checking your credit score on PaySense. If there one thing you should do this week, it should be this!
Apply for Loans of upto ₹5 Lakhs easily using your phone or laptop, and pay back on low EMIs