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What’s Your Financial Health Score Like Right Now?

09 Aug 2022 0 COMMENT

“It’s not your salary that makes you rich; it’s your spending habits.”

To lead a stable and comfortable life, you need to maintain strong financial hygiene. A good rule of thumb is to have a budget, spend less than you earn, invest wisely, and plan for the future. When you have all of these elements in place, you can rest assured that you are financially prepared for life.

If you are unsure of where you stand financially, here’s a quick quiz that will help you ascertain how financially independent you are. Choose the answers closest to your situation, and at the end of the quiz, we will tell you what your financial status is. In addition, we will share some tips and tricks for improving your financial health.

Ready to get started?

1. Do your monthly expenses exceed your monthly income?

A.            Always

B.            Sometimes

C.            Never

2. Do you have a well-defined budget for every month?

A.            No, I wing it

B.            Yes, but I don’t always stick to it

C.            Yes, and it’s on point

3. How many credit cards do you have?

A.            More than two

B.            One-two

C.            Zero

4. What is your credit score?

A.            I don’t know

B.            Below 650

C.            Above 700

5. How many months of expenses does your emergency fund cover?

A.            What’s an emergency fund?

B.            One to three months

C.            Three to six months

6. Do you have health insurance?

A.            No

B.            Only the ones my employer provides

C.            Yes, I have a well-covered health insurance policy

7. What does your investment portfolio consist of?

A.            My savings account is my investment portfolio

B.            I invest in fixed deposits

C.            I have a healthy mix of fixed deposits, stocks and mutual funds

8. Do you have a retirement fund?

A.            No, it’s too far away to plan

B.            Not yet, but I plan on starting soon

C.            I have a steady amount that goes into my retirement savings

9. Do you have long-term financial goals and a plan to achieve it?

A.            No, I focus on my day-to-day spending

B.            Yes, but my plan is still in progress

C.            Yes, I’m investing towards my long-term goals

10. Do you plan your taxes well in advance?

A.            I don’t file taxes

B.            No, I usually leave it to the last minute

C.            I plan my taxes and tax investments at the start of the year

Reading the Results

  • If you have answered A more than 5 times, then you’re financially unhealthy.

You don’t have control over your finances yet. You’re still trying to make ends meet with the income that you make and perhaps live off debt. Not to worry though. There’s nothing some planning can’t fix. Start by creating a budget and aim to make a surplus every month. Divide the surplus between paying off high-interest debt like your credit cards bills and making investments. If you have more than two credit cards, don’t use them interchangeably to pay off debt. Work on improving your credit score by paying off debt systematically. At the beginning of every month, set aside some money for investments. Diversify your investments among tax-saving instruments, mutual funds and fixed-income securities. Also, start building an emergency fund to help you in case of an emergency.

  • If you have answered B more than 5 times, then you still have some way to go to achieve financial independence.

While you may have taken your first steps towards improving your financial health, you still need a clear path for financial direction. You may be making a surplus, but you may not be investing it wisely. To achieve financial independence, you need an emergency fund that lasts you at least three months. You also need a fund to ensure you have enough after retirement. Track your expenses closely, invest your surplus money in diversified instruments. Never put off your tax investments to the last minute. Consult your tax planner or financial advisor to help you plan your taxes better.

  • If you have answered C more than 5 times, then you are financially healthy and independent.

You certainly have a good grip on your finances. You have minimal debt or at least you pay it off on time. You make smart investment decisions and plan your taxes well in advance. You even have your retirement planned out. However, that doesn’t mean you cannot do more. Go over your investments regularly and make sure you are saving for short-term, medium-term and long-term financial goals. Invest in short-term goals through debt instruments such as bonds. Take care of your medium-term goals through equity investments via mutual funds. Split your long-term investments between mutual funds and direct stocks.

Plan your finances properly no matter how late it is. It is said "A penny saved is a penny earned." Be sure to stay on the road to financial independence.

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.