While we all have different goals in life, there’s one that we all share—the goal to be financially sound. All our lives, whatever we do, we do it with an aim of earning better. It becomes quite frustrating if, after all that struggle at work and burning the midnight oil, things don’t go the way we want them to. The ultimate reason for working that hard is not merely a raise or a promotion; we do it for something more—to be financially sound. This keeps us going.
Some of the basic parameters to judge anyone financially are—their income, their spending habits, their savings and investments. If you’ve got all or most of these right, your finances are more or less on the right track.
Even if you’re not facing any financial troubles at the present, that doesn’t ensure a safe future ahead. Here are some pointers to check whether you’re doing enough to keep your financial life on track:
- What does your bank balance say?
Your bank balance at the end of every month acts as a great indicator to show you how well you’ve done. Did you exhaust it all by spending on a sale or on some expensive gadget that you don’t even use? According to most financial experts, you must save at least 20 per cent of your monthly salary. If you’re unable to do that, you’re doing something wrong.
- Are your resources growing?
Your resources include everything you own—your bank balance, property, cars, gold. To evaluate your financial standing, you need to evaluate the net worth of all your resources and see if there’s a positive growth. It doesn’t mean that your net worth needs to grow exponentially, but there just needs to be a positive growth curve for it. Continuous growth in your resources is a great indicator of a good financial record.
- How many loans do you need to repay?
You might be earning well, but if you have a lot of loans to pay off, you need to plan your money better. First of all, you must not borrow so much. In the worst case, even if you need to borrow, you must balance it well. If you’re in need of a house, it makes sense to opt for a Home Loan. But to take a Personal Loan just to fund a dream vacation simultaneously might not be a great option. If you’re heavily dependent on loan money, you have a lot to work on!
- Do you have insurance?
‘Why do I need insurance to check my financial stability?’— that’s probably what you’re thinking right now. Consider this scenario—you just saw the house of your dreams and arranged for a huge down payment for a Home Loan. But suddenly there’s a medical emergency and you have no other option but to use that down payment money to take care of the emergency. As you rise up to the occasion and look into the emergency as a priority, your dream to occupy that house gets postponed. Heart breaking, isn’t it? Well, you could’ve easily avoided this situation if you had taken a Health Insurance cover, right? You could’ve used the insurance money for the emergency, while your down-payment money would’ve remained untouched. Now you know why staying protected from potential external damages is essential for your financial security, don’t you?
- Do you have a functional emergency fund you can depend on?
Life is full of uncertainties. You can make a lot of plans and hope for your life to go a particular way. But, well, life always has something else in store! While it’s good to make plans, it’s better to save up for these uncertainties as well. We have all experienced these uncertainties, haven’t we? So, the question is—have you saved enough as an emergency fund that can rescue you from situations where nothing else seems to work? If you have one in place, congratulations! Your finances seem to be on track. But if you don’t, it’s better to start saving as soon as you can. While life surprises you with problems, you should surprise it back with a quick solutions to those problems.
- Are you investing consistently?
And the million dollar question is back! The reason people always keep asking you this (especially people who are financially clued-in) is that these investments can be your knight in shining armour when you don’t have any other support. According to most experts, you must invest at least 20 per cent of your monthly salary to get better returns in future. If you want to be financially secure, you can’t expect a Savings Account to work magic for you! If you think you need time to gain enough knowledge to invest in the stock market, that’s okay. At least put your money in a Recurring Deposit to gain from their higher rates of interest.
- Do you have a list of short and long-term financial goals?
People often ask you this—‘Do you have a goal in life?’ Well, this question applies to your finances as well. The whole point of setting a goal is to bring a motivational factor into your life. When you know that you have a goal to achieve, you naturally tend to be more focused and try making every attempt possible to achieve it. Precisely the reason our parents used to give us examples of the neighbour’s child or that annoying cousin who scored above 90 per cent marks in their board exams. They thought that if they set a goal for us, we might try and work harder. Irrespective of whether it helped you score better or not, it sure must’ve helped you focus better and made you feel that beating that cousin (maybe literally too) was all you wanted, right? That’s the power of goal-setting. If you haven’t already, it’s time to set some financial goals for yourself.
Hopefully, by now you have a better idea of whether your financial life is on track or not. In case you need to change a few things to eliminate the roadblocks and become more stable, financially; now is the time to start!
Additional Reading: Become a Crorepati: Kick the Butt
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I have a overall work experience of 5.5 yrs, now i am moving to Malaysia for a job change, my employer does not provide continuing PF option there, can i continue my PF-UAN account on my own? is there any option???
which will be the best bank account for saving money from Malaysia to back home in India??
Since EPF is for Indian employees, your EPF account will become inactive after you shift abroad. There are several other avenues through with you can invest in India (such as real estate). You will need to open an NRE or NRO account for transfer of money.