“Planning is bringing the future into the present so that you can do something about it now” ~Alan Lakein
Do you have a well defined financial plan in picture? If you have, you are the luckiest because lots of people still don’t know or struggling to plan their finance in a better way. Frankly speaking, It is impossible by anyone in this world to have 100% perfect financial plan, but still highly possible to have a perfect financial plan for life. In this article, I don’t have any plan to talk about creating a financial plan instead, I would like to introduce three major factors to compare and check your present financial health. I am sure, this would help you to identify your present financial status and to take necessary remediation to rectify any errors if there.
Financial health checkup highly depends on three major factors: Debt position, Expenses ratio and Savings status. Here is detailed information on each factor to understand well how each of this influence your financial plan.
Debt Position: This should be your start up step to understand your financial health. Check your debt status first. You can easily do it by comparing your monthly income flow to the debts you have. If 75% or more of your monthly income goes to pay debts, certainly you are in a bad financial position with debts till the neck. Get required counseling immediately to become debt free. If 50% or more goes to pay debts, you are still inside the dangerous zone. You also required approaching well qualified professionals to get proper advice and counseling to become debt free gradually. If you are paying 30% or less of your monthly income to pay debts, you are of course in a safe zone but, need well disciplined approach to clear off all the debts early as possible. Read my previously posted, well written, working plan to become debt free. Practicing these steps would certainly helpful to know how to escape from debts through simple steps.
Expense Ratio: Better financial plan always required better budgeting in place. This would help to limit unnecessary expenses to a great extend. If your total monthly expenses take 70% or more of your earnings, it is clear; you don’t have a good spending plan! Seriously consider budgeting to control your expenses. When a perfect budget in place, you are taking control on your earnings and expenses and sealing all loop holes through which unnecessary money flows happening.
Savings Status – Savings known as the core of financial planning. It decide how much you can invest for achieving your goals, how big and perfect your emergency fund will, how do one able to meet unexpected money requirements etc. As it is the major factor to analyze your financial health checkup, your present savings against monthly income provides a clear picture. If your savings is less than 25% of your monthly income, you are certainly have the financial risk from savings.
Now it is the time to sit in a calm place and assess yourself to identify how good your financial health is. Above factors help you to get clear picture on your present status and assist you to move with further to rectify any errors. Remember, financial planning success never measured on the basis of having no debts or how large is the monthly savings of one. Instead, it should measure with the perfect life standard from the beginning to the end.
Readers: I have mentioned Debt Position, Expense Meter and Savings Status are the three factors to identify financial health. Do you completely agree with me or still feel if there is another important factor(s)? What is your opinion?