WHAT IS A FINANCIAL HEALTH CHECK?
A financial health check is a holistic review of your personal finances. The idea is to help you better understand how you are managing your money and whether you are on track to achieve your financial goals – and if not, where changes need to be made.
WHY IS FINANCIAL HEALTH CHECK IMPORTANT?
When applying for a loan or making any big purchases, it is imperative to know your savings and loan eligibility. A regular check of your credit score regarding your purchasing power/borrowing limit is essential to evaluate and set financial goals. Most websites now offer a free credit score check. An individual can take advantage of this and check his/her creditworthiness.
It is vital to evaluate you financial position in periodic intervals to know the debt you owe. If the person is more into credit card debts or any other form of debt, corrective action can be taken to lessen or close the deficits. A person can reduce his debts by tackling their monthly expenses through cash and making due credit card payments on time. While paying through money, we tend to minimize our costs and maximize our savings.
Budgeting The Surplus
It is a beneficial and great habit to reserve a portion of income as a surplus and keep it in hibernation mode. The surplus thus accumulated can be used to invest or maybe stashed for any emergencies that may arise. The surplus or deficit of money will only be known if there is a routine financial check-up.
Planning Your Emergency Fund
Planning for an emergency fund is a must for individuals. One cannot predict the timeframe of an emergency occurrence but can take steps to prevent it. It is practical to plan your monthly budgeting with an inclusion of emergency funds. If not, the surplus saved can be used for emergency fund planning.
Know Your Investment Options
If a routine check of financials is undertaken, it is easy to identify areas where there are unnecessary expenses or where the costs can be brought down a notch. The amount saved from these regions can be channeled into an investment plan which can grow your wealth or help you save taxes in the long run. However, before entering the world of investing, it is better to seek professional help to plan your investments and analyze your risk appetite.
A regular financial check-up can make an individual aware of their economic status as well as teach them ways to manage their hard-earned money to make profits. One would also learn the techniques to assess personal goals, the means to achieve them, and to adopt the optimum path of saving and planning for the future. It gives a whole new approach to financial understanding.
Save For Retirement
Planning for your retirement is equally important. Due to rising medical costs and cost of living, it is prudential to plan your retirement nest egg or to invest in schemes that would make your retired life as comfortable as possible. When a routine check is conducted, you can identify the amount that can be used for your retirement years or park that amount in a retirement saving scheme available in the market.
The reasons above emphasize on the importance of conducting a financial status check from time to time. Proper financial planning only leads towards better health and a brighter future.