Like a car needs regular tune-ups to run smoothly, your finances also require periodic check-ups to be free from fiscal stress. Taking time to review your income, spending, and objectives helps you identify the areas for improvement and act as a roadmap for well-being.
Understanding Financial Health
Financial health refers to your current financial situation and how you manage cash flows. In other words, it describes your monetary situation, including fixed and variable income, spending, savings, and investments.
Having good financial health provides stability in the long run and, thus, is closely linked with your mental and physical health.
What Financial Health Check-up Entails
A financial health check-up is an approach you need to take to get a holistic review of your finances and current cash flow situation.
The key idea is to take into account whether you are managing your finances correctly and are on the right track to achieve your financial objectives. If not, it helps you recognize the changes you need to make.
Importance of Regular Financial Health Check-ups
As mentioned earlier, regular financial health check-ups are crucial to ensure financial well-being. Here are some of the reasons why you must check your financial health regularly:
Recognise Financial Goals
Assessing your income, spending, savings, and investment allows you to identify your short- and long-term goals. Moreover, your life goals can also change as you evolve. Hence, regular check-ups ensure that you can evaluate the objectives you set in the past and rework them to align with your new goals.
Evaluate Your Budget
A robust budget serves as the bedrock of financial well-being. A financial check-up is a great opportunity to set a budget or review it if you already have one. You can also make changes to your budget to reflect the changes in your goals for the upcoming year and beyond.
Budget the Surplus
By making a budget, you can also develop the habit of reserving a portion of your income as a surplus. Not just that, financial check-ups also allow you to decide where to spend or park this surplus amount.
You can get the surplus or deficit amount when you regularly track your financial well-being.
Review Your Debt
Debt can be a valuable tool to bridge the gap between your savings and deficit in finances. However, if not repaid responsibly, credit can push you into a debt trap, worsening your financial situation.
Regular check-ups of your financial health ensure that your debt remains manageable compared to your income. When opting for a debt, assess its affordability using an online loan EMI calculator.
Know Your Investment Options
Financial health checks allow you to make more informed decisions relating to investments. Making the right investment is crucial to achieving your long-term financial goals, such as your child’s higher education or buying a home.
In the long term, investments carry the potential to bring a positive change in your life.
Plan for Emergency Funds
Certain expenses, such unwarranted medical bills, are always unwelcome but they are the reality of life. Regular checks on your financial health ensure that you can set aside a part of your income to act as a buffer in case an unexpected expense arise.
Build Retirement Corpus
A crucial aspect of planning for financial well-being is saving for the time when you retire from work. The rising cost of living and healthcare expenses make it prudent for you to identify the amount you need for a comfortable post-retirement lifestyle.
Consequently, you can decide the amount you plan to invest in a particular financial instrument that may act as a fixed source of income after your retirement.
In conclusion, do not wait for a fiscal crisis to strike to prompt you into checking your finances. Taking charge of finances empowers you to make informed decisions and grow towards a brighter financial future.
On the Bajaj Markets platform, you can plan your finances better using various EMI calculators for loans and investments or by initiating a free CIBIL score check. Visit this site to explore these tools and make informed decisions.
