Measuring our own financial fitness is scary. Why? Because it tells us about our own financial misdeeds. And exactly this is why measuring financial health becomes inevitable. They say- What gets measured gets Managed. So, to manage better, measure first.
What is financial fitness?
Doctors measure your Height, Weight, Blood Pressure, Blood Sugar etc. From the report, doctors understand more about your health. Then they treat you as per the findings in the report.
Similarly, there is something called as Financial Health Check-up. Financial Health check-up is a simple but very effective questionnaire. The participant is expected to answer the questions. Through these questions, important financial parameters are checked to understand whether or not you are financially fit. Like various pathological tests a doctor prescribes, a financial planner measures certain important aspects about your financial health. The result is an enlightening document which helps you understand where you stand.
What are the factors a financial planner may look at?
It has a long range starting with basics such as –
Surplus
This parameter help understand whether you are spending your income within the prescribed limits. This is a very basic action which has been reiterated by investment gurus like — Warren Buffet and also written in the books like “Richest Man in Babylon”.
Investing Jargons
Most financial products have terms and conditions which mentions various charges, lock-in periods, exits loads, volatility, return guarantee. These are finely printed. Most of us don’t read them. You need an expert to understand the same.
Are you organized?
Being organized pays in the long term. Most of our financial data and documents are not well organized. We don’t get them whenever needed. This is a basic first step towards a great financial future.
Investment and Taxation
Investment has to be tax effective. In case you pay taxes on your investment returns, you may end up earning subdued returns. Tax efficient investment is a way forward.
Money for life goals
Checks whether you are adequately investing for your life goals. I am sure no one of us would want to land up having no money for the education of dear daughter.
Investments Spread
The investments cannot be concentrated in a single asset class. Thatcan be risky. The questionnaire interestingly checks whether the investments are appropriately spread across suitable instruments.
We have listed only a few points above. It would be real exercise taking up the Financial Health Checkup. Life is a real exam. In this exam, we do well in some topics but we may miss on some other important topics. Take up this exam and you will understand have you fared in life so far. Who does not want to know the exam marks? This questionnaire is a terrific tool to start with. It helps perfectly understand whether your family is rightly placed in terms of personal finance.
How to use this Financial Health Check-up Questionnaire?
This questionnaire has 20 questions. Each question has 5 rating parameters. So you need to rate each question for these options-I strongly
Strongly Agree — 5 points
Agree — 4 Points
Somewhat agree — 3 points
Don’t Agree — 2 points
Strongly don’t agree — 1 point
You need to choose your most relevant answer. Tick your natural choice so that you will get the perfect Financial Health Score Card. Be true to yourself. Once you are done with all the questions make a total of each column. Then add the total of each column together. This is your total score.
How you can rate your financial health based on the score you generated?
- 0 to 20 — Very Poor
Your financial health is in bad shape. It is an alarming situation and you need to act immediately. - 21 to 40 — Bad
You are not doing well. Take corrective action to overcome this situation. - 41 to 60 — Average
Though some of your money habits are good, you can face a financial crunch over time. - 61 to 80 — Good
Your financial health is good. But, there is scope for further improvement. - 81 to 100 — Excellent
Congratulations! Your financial health is great. You are on the right track. Keep it up.
While advising our clients we ensure that we understand his Financial Life Stage along with the Financial Health. You need to handle each Financial Life Stage separately. Financial Health Score helps us understand the intensity of the implementation required. For now, take the Financial Health Checkup by clicking this link. It’s Free. This is your first step towards a bright tomorrow.
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