Our finances impact important things in our life including our health, relationships and career. It is very important to make sure that we are financially fit. Here are 10 checks that can help you figure out your financial fitness.
1. You have set up an emergency fund
You need to have 6 months to 12 months emergency fund to handle uncertain events in life. This fund should be liquid, i.e., you should be able to convert to cash quickly.
2. Your EMI is less than 30% of your take-home salary
If your income is very predictable and growing, banks would love to give you loan, even for EMI more than 50% of your take home. They make money through loans. But you need to ensure that you have enough money remaining in your account for expenses and your savings apart from paying EMIs.
3. You do not pay interest to credit cards
Credit cards charge absurdly high interest rates ranging anything from 24% to 30%. It is fine if you are using credit card for convenience but paying interest to credit card companies is not financially wise.
4. You have a term insurance (if you have dependents)
Any uncertainty in your life shall not impact your dependents. Term insurance is cheapest insurance that one can have. Also, check if your insurance value is appropriate for your needs.
5. You have a health insurance
No one plans to get sick or hurt, but one needs medical care at some point. Health insurance protects you from unexpected, high medical costs.
6. You are saving for your aspirations
So you want to buy your next car or take that vacation abroad or have a fancy destination wedding. If you know how much you need to save and have a plan in place, you are one point up.
7. You should be saving for your retirement
Who does not want to stop working and just enjoy in life. Check if you are ready to pay for this fun once you stop working. This is one of the most important check for your financial fitness.
8. You have automated investments
Growing your money is as important as making money. As human beings, it is very easy for us to procrastinate or forget keeping money aside. If you invest regularly, add one point to your financial fitness
9. You minimize your taxes
Taxman provides lot of provisions like section 80C to save on taxes. Are you leveraging all of them to reduce your taxes.
10. Your are investing in yourself
The most important investment is investing in yourself. Do you allocate enough time and money for your personal growth?
If you are 10/10 with respect to these points, you are our hero. Please write us at email@example.com, we will be happy to talk. If you don’t, let us know how we can help you become financially fit.