Diagnosing, curing financial ailments.
How often do you go for a doctor’s appointment for a check-up? Often, right? But how often do you check on your financial health? Probably not as often, yet knowing your financial health is equally as important.
Just as you are responsible when it comes to your physical health, you need to be as prudent when it comes to your financial health. Besides, the two are often related, but thats a story for another day.
How do you know you are financially sound? Just what symptoms should you look out for? It’s only when you identify the symptoms and cause of sickness in your financial health that you can begin seeking a remedy. Here are some practical and simple ways to evaluate your financial health.
Net worth is not as complicated as it may sound. It’s simply your assets minus liabilities. This pretty much summarises all the financial decisions that you have ever made throughout your lifetime.
You can assess your financial health by monitoring your net worth over time. Is it changing for the better or for the worse? Your net worth reflects the performance of your investments as well as your spending habits. If it is declining, then you need to spend less.
If your net worth still declines regardless of cutting down on expenditure, then you might be taking out too much from your savings or perhaps have increased your debt levels. If you have trouble calculating your net worth consider using the many free online tools available.
You cannot assess your financial health without critically evaluating your debt levels. You can evaluate your financial health by asking two fundamental questions: Has your total debt ratio gone up or down in the past 12 months?
And secondly, have you borrowed any money within the last one year? These two questions are important because it is possible for you to have reduced overall debt and added additional loans in the last year.
The key to getting out of debt is to stop taking new debt. While assessing your debt levels, it is important to go beyond looking at your numbers. Take an introspective look to understand why you got into more debt. Understand your finances and see whether you can pay out your debt faster than you did in the past.
This is a fun one. Nowadays there are all sorts of fun simple and short standard questionnaires that you can take, which can help you gauge how healthy or unhealthy your finances are.
The questionnaires ask simple questions related to your finances, from your debt levels to spending habits, savings and even retirement plans. Some even help in calculating your debt to income ratio, and end by giving tips on just what is driving your financial health and how to improve. Interactive playful tools make it fun and less ‘serious’, all while helping you move to the right direction.
Just as situations in life are fluid, so are financial situations. As you go through the motions of the different developmental stages in life, therein comes new responsibilities which often have financial consequences.
Take time to evaluate what some of these major changes are and assess how these situations have either boosted or deteriorated your financial health. These changes can range from career change, marriage or even having a child. Whatever the situation, you need to make sure you are adapting and adjusting to the new situations in a healthy way.