Financial wellness begins with awareness
The first step to achieve financial wellness is knowing where you stand currently.
And where you want to go… How does it help you?
When you are aware of your start and end points then, it becomes easier for you to know the gap and the areas of your financial life which require improvements.
After that, you can figure out “how” to go about it.
- Analyse your present financial state
This is basically knowing your present net worth (total assets – total liabilities). If it is positive then, congratulations you are already one step up; however, if it is in negative then, before anything else you need to figure out a strategy to get out of debt.
- Having a regular source/sources of income
Everything begins with having a steady income. Are you earning enough? If not, how you can increase your income? If you are a house wife, how you can talk to your partner and ask him for money?
- Do you know where your money goes?
Unless, we don’t know where our money is going, we won’t have a clear picture of our spending habits. Your task here is to track your past month expenses and check your spending habits. Do you think there is scope of cutting down on some expenses? (Refer ‘money in and out’ tracker)
- Getting out of Debt
As soon as you realize that this is the liability that you need to fulfill first then, the process of “regaining balance in your financial life” begins. Remember,
“You cannot hate your creditors; you nor be afraid of them, nor feel ashamed of yourself.”
It’ time to take control in your hands and calculate how much you owe to them. Feel accountable and tell yourself sincerely that you would love to pay your debts in full.
- Creating an emergency fund as the backup plan
“An emergency fund acts as the backbone of your financial system.”
In case of income loss or for immediate bigger expenses, it can feed your money needs. There is a rule of thumb for creating an emergency fund; if you are bachelor or married with a working partner and have no kids then an emergency fund of 3 months living expenses is okay; if you’re married and have dependents on you, then it is wise to create a fund with 6-12 months of living expenses.
- What are your ‘Financial Goals’?
Financial goals are your financial commitments for a specific period of time. Like for example, you can have a financial goal of funding your Europe trip after 5 years, a financial goal of education fund for your girl’s higher studies after X years, another goal could be building your retirement fund, and so on. Task 2: Write down all your goals in a sheet of paper or create a separate diary for things related to your personal finance.
- Is your retirement plan in place?
The moment you start earning, the first financial goal one should have is funding the retirement fund for oneself. The earlier you start the better it is and, the bigger fund you will have at the time of your retirement.
How you can build your retirement fund, we will learn later.
Build Your Credit Score
According to Wikipedia,
A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
What is a good credit score in India?
A credit score in India of 800 and above is considered excellent. A good credit score is anything above 700. The higher the credit score, the more confident banks and NBFCs are that you will be able to repay the loan. Most credit scores range between 600 and 750.
P.S. – “I AM ON A MISSION TO CREATE MORE WOMEN Investors IN INDIA.”
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