Give Yourself a Prudent Financial Health Checkup

Like our physical health, we generally ignore a needed financial health check-up also because both require technical advice, a long-term view, and proactive approach. But you don’t need to be scared; this article will articulate over various areas of personal finance and guide you along the way.  In the money world, our earning life is so busy, even with hectic schedules most of us manage to keep up with the family, home maintenance, exercise, and work. But  what about your finances? When was the last time you sat down and gave yourself a financial checkup?  The answer may be probably not or forget the time.

So, this article reminds you that how much paramount importance of your financial health checkup in every stage of your financial life cycle. For instance, you might have dreamed of buying your dream home, a new car, child’s higher education and grand marriage, trips to holiday destinations abroad and comfortable retirement. But, have you determined that whether your desired financial goals are achievable at the current financial situation or should you wait to live your dreams? While undertaking financial health check at various junctures in your financial life you would see where you are on the path to your long-term financial goals and got alert about your existing investments which could lead you to a financial crunch.

What Financial Health Checkup takes?

Everyone has limited sources of income, which of course means that it may be impossible for us to carry on generating income by holding on to a job throughout our lifespan, if the worst scenario occurs that is losing your job and paucity of funds in future goals.

Let us take a scenario of Mr Raghu who is aged at 37 years having monthly salary Rs60,000. He intends to buy a new car worth of Rs5.50 lakh. If he accumulates of Rs2 lakh as a down payment from his own resources and monthly EMI of the car is Rs11,458 for tenure of 3 years then it is probably appeared that within the means of Mr. Raghu But before purchasing the car, he should not only needs to consider his monthly expenses but also any unforeseen liabilities, event and future goals, which may arise in the near future. If his monthly expenses are high at the present moment, or he would need to fund his children’s education in the near future then he can postpone his desire to buy a car till he has enough savings and investments to meet his other priorities.

If Mr Raghu would have purchased the car without foreseeing his upcoming liabilities and his current financial status, he would probably be unable to pay for the more urgent needs of his family. Hence he must review his finances before undertaking any major financial decisions in life.

Imagine a far worse scenario if,  you have very little left in your savings too, because you have just purchased the luxury car and the beautiful retirement home in suburb area that you have always dreamed about having all your working lives. What is needed here to address such a predicament is to start making your money grow to enable you to sustain comfortable lives after retirement.

Finding solutions to the above problem requires that you know where you stand now financially. It is of utmost importance that you should know how to measure our financial health.

Check your Cash flow

In order to know what your current financial position is, you need to review your inflow and outflow of money. You have to clearly identify your main sources of income, which are basically monies that go into your pocket, such as your salary, dividends, capital gains, rental income from your properties, distribution from business, interest from your bank savings and fixed deposits.

Similarly, you need to track all of your expenses. An expense is the money that leaves your pocket. They are all expenses that you have to incur in order to maintain your lifestyle. Examples would include credit card payments, housing loan repayments, car loan repayments, utility payments, grocery bills, taxes, travel and entertainment and all other personal expenses.

Check your Net worth

Most people don’t believe in using net worth as a barometer for measuring financial wealth.  It gives you the “big picture” of where you stand with regards to your financial health. Increasing net worth can be achieved in 3 ways. Reduce debt/liabilities, increase assets, or do both at the same time.

It’s fairly simple to check your net worth. You simply subtract what you owe (your liabilities) from what you own (your assets). So even if your assets are not growing, your net worth will improve if you are paying down debts.

Check your Investments

You must have been investing or invested for the long term with a diversified portfolio to meet your future financial goals. So, check whether your portfolio can meet your goals with fewer risky instruments like equity or with safe instruments like debt or mix of both. This is also the time to see whether your portfolio requires rebalancing to your target asset allocations, which is recommended doing at least annually. For instance, as you get closer to retirement, you should also begin to project whether your portfolio and other sources of income can sustain your current lifestyle. If you are off track, you need to consider incorporating potential solutions to make up for the shortfall.

How are you sleeping?

Prudent Financial Health checkup begins to give you a good snapshot and longer-term trend of what is happening in your financial lives and whether changes need to be implemented. It’s a good idea to have a summary of your financial situation to hand – any savings, debt, incomings, outgoings – and your future plans.

To request a Full report of your Prudent Financial health checkup go to the PrudentFP website.

If you can’t find anything through PrudentFP. For, you could try setting up an appointment this week, or for a date in the future, for a free financial planning surgery with Prudent Financial Planners.

You have to start someday, why not today?

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