Your overall financial health is comprised of many elements, from learning how to live within a budget, to building good credit history, controlling debt & excessive spending, developing short & long-term financial goals, and learning to invest.
Why do you need a Financial health check?
It is necessary to understand where the family stands today in terms of personal finance. It determines the income, ascertains the spending patterns and also helps to know the level of savings one can or has to do. This diagnosis helps in assessing whether an individual’s financial situation is under control, also it tries to know whether the investments being made are in sync with your financial goals. This analysis of financial position additionally helps in by setting goal based personal financial plans so as to achieve these financial commitments.
A good way of doing this is preparing a budget. As part of the budget, list down expected income and expenses over the next few months to a year. Make sure to include irregular expenses such as annual insurance fees, and consider unexpected expenses such as an emergency hospitalisation.
Your budget will tell you whether you have a surplus – your income is higher than your expenses – or a deficit. If you identify a potential financial emergency in your budget, it’s important to look at developing possible solutions quickly.
One way to mitigate an upcoming cash shortage is a reduction in or deferral of expenses.
An emergency or ‘rainy day’ fund is an amount of money set aside to cover unexpected expenses that may arise in a financial emergency. Accident, Need for hospitalisation etc. It’s important to have an emergency fund so you can cover necessary expenses that go beyond your current income without having to go into debt.
If you are already in debt, it’s important to ensure that it’s sustainable – that means you are able to pay it when repayments fall due. You also need to be aware of the costs and set-ups associated with debt.
It is also important that you potentially grow – your income over the longer term, all the way to retirement. You could also consider opening up new sources of income such as interest from fixed deposits or returns from other financial investments such as shares or rent on property.
It is also worth making sure that you have sufficient insurance cover to avoid additional financial stress as a result of any unexpected events.
This may include sufficient home and home contents insurance, car insurance and health insurance.
At FinRisk Doctor, we help you by offering advice on improving your financial wellbeing and help by offering customised financial solutions.