Financial Health is merely related to a sound financial position and being stress-free.
It is concerned with a well-maintained budget, perfect control over your expenditures, investment of funds, having insurance for your unforeseen circumstances, and maintaining an emergency saving account.
To achieve complete financial wellness, we need to work on the following five key areas:-
1. Budgetary Control of Income For Financial Health
The first and foremost key area of financial health is control over your budget. It includes the process of calculating your earning and expenditure during the period to achieve financial goals.
In addition to it, proper planning of savings and investment to meet future exigencies and challenges.
Therefore, take a notebook and pen and jot down your monthly earning on one side and monthly expenses on another.
Remember, you should remain within your means. It is as simple as it may sound, your expenses should be lesser than your earnings.
This principle of expenditure within your means helps to plan savings and investments for futuristic financial security.
Successful budgeting control of financial wellness usually delts with setting some personal principles of life and their proper adherence.
2. Be Conscious About Your Expenditure Behaviour
First of all, always review your behavior of expenditure.
Make changes in case you discover expenditures are not parallel to your income.
For instance, if you’re spending more money on consuming restaurant food than cooking at house, you can save more by just making small behavioral adjustments in your daily lifestyle.
Secondly, prefer to substitute goods as per your purchasing power.
Always try the approach of searching and buying. Put your best efforts to search in the market for substitutes available for your required item and then buy the best one as per your pocket.
For example, if you are going to buy a t-shirt, compare the substitute brands in the market and buy the best and lesser expensive available in the market to achieve financial wellness.
3. Save Before Your Expenses
Always set your savings on Auto-pilot mode. A straightforward method to arrange an automated deduction of your savings from your salary account.
Before, Savings or Investment, everyone should clear the concept of a diversified portfolio. The diversified portfolio is a division of savings amount into various financial assets such as stocks, bonds, commodities, currencies, fixed deposits, and cash equivalent for different phases of life i.e. Career, Marriage, Parenting, Freedom, and Retirement.
Here, I want to introduce the power of a Systematic Investment Plan (SIP) to achieve financial independence. The SIP plays an important role in disciplined saving plans.
The following are the advantages of the SIP:-
- Discipline in Investment.
- Better planning for budget.
- Option for monthly auto payment.
- Better control over the budget.
- Inculcate the habit of thrifting.
- No worries about the market’s up and down.
In the long run, it’s not just how much money you make that will determine your future prosperity. It’s how much of that money you put to work by saving it and investing it.
Peter Lynch
An investment portfolio is like a pizza that is divided into pieces of various sizes, representing a variety of investment schemes to accomplish Financial Security.
We have outlined the best saving and investment schemes available in the market to build multi assets portfolio:-
- The simple and conventional method of saving is a Fixed deposit in nationalized bank/ Post Office.
- Investment in Mutual Funds.
- Protection and investment scheme of Life Insurance.
- Systematic investment in stocks, bonds, and commodities.
- Disciplined investment in Public Provident Funds.
- Investment in physical Gold or Goldbees.
- Investment in high returns real estate on easy loan installments.
4. Purchase Insurance – Wonder of Financial Security
Insurance policies are the protection from loss in emergencies or inevitable unforeseen circumstances.
It works as an umbrella on rainy days, that’s why it is the proven bulletproof step towards financial security and wellness.
Therefore, purchase different insurance policies to cover financial loss or liabilities in life. Before, the purchase of insurance policies, one should clear the concept of insurance.
Insurance is a contract by means of policy, in which an insured (policyholder) receives financial protection or reimbursement against losses or damage to the insured or his entity.
In fact, Insurance played an important role in safety and security, stimulating saving, capital generation, and risk management.
The following are the most common forms of insurance:-
- Life insurance.
- Health insurance.
- Home insurance.
- Vehicle insurance.
- Liability insurance.
- Education insurance
In a nutshell, the wonder of an Insurance policy is that it is full of benefits such as Safety & Security of life, Saving & Investment for the future, and above all tax benefits on income.
5. Build Savings Accounts for Emergencies For Financial Well-being
Your savings account is your first serving hand when the necessity arises.
This account can be opened in any Bank or Post Office, the depositor can withdraw or deposit money as and when required, with the benefit of a simple interest calculated yearly.
It is separate from your other saving or investment accounts maintained for different phases of life. The best part of it is the liquidity of cash and saving benefits.
The thumb rule of a building saving account is to have a minimum of five months of income as a stockpile.
It inculcates the habit of thrifting and saving money. The statement of account enables you to analyze your expenses and have proper budgetary control over them.
It is an ideal key step towards savings for a particular purpose, such as new furniture, vacation with family, purchase of a vehicle, etc.
It played an important role in crisis management and financial security that’s why many people defined it as an emergency savings account.
In conclusion, Financial health is simply to have a secure financial life. It means your financial stability and wellness is evaluated by your well-maintained budget, perfect control over lavish expenditures, adequate saving & investment of funds, having insurance for your unforeseen circumstances, and maintaining the emergency saving account.
If you have worked on all key areas of financial health, that means you are financially strong & well-being. At last but not the least, always consult your financial advisor before any investment.
