After Body and Mind, Check your Financial Fitness Also

This week Our Prime Minister announced fit India Campaign “Body fit hai toh mind hit hai (If the body is fit, the mind is fit),” said Prime Minister Narendra Modi while launching ‘Fit India Campaign’ on National Sports Day celebrated every year on the birth anniversary of hockey wizard Dhyan Chand. 

In this day and age, tracking our health stats is very important and we all put efforts to make sure that our body is healthy. But what about our financial fitness?

Let us look at major parameters to know how healthy we are financially:

1. Spending Less then Income:

To be financial healthy it is very important that on cash flow basis we are in positive numbers. Means our monthly expenses should be less than our monthly income.

2. Paying all the Bills on time:

There are many utility/household bills like electricity, gas, phone, Credit card bills. Paying all the bills on time and in full is the good indicators of financial fitness.

3. Have Emergency Fund:

There are emergencies which comes without any prior announcements like medical emergency, job loss etc. In general, the more inconsistent our income is and the more dependents we have, the larger an emergency-fund cushion required. As a thumb rule we should have 3-6 months expenses as emergency fund in liquid mutual funds/savings accounts.

4. Have Sustainable EMIs:

Debt-to-income ratio (DTI) is a figure lenders use to gauge how well we manage our debt. To calculate DTI, add up monthly debt payments and then divide the sum by gross monthly income, the lower the DTI, the better it is. It should not be more than 40% in normal case.

5. Have a Good Credit Score:

Similar to a DTI, credit score is another way lenders measure how likely we will be able to repay our loan — and a lower score usually means higher interest rates on everything from mortgage to credit cards. Normally the credit score should be above 750+ in the scale of 900 to get loans easily at decent rates.

6. Have adequate Insurance:

Covering the risk is another important aspect to be healthy. Health Insurance, Life Insurance and Accidental coverage are important insurances. Having appropriate insurance allows individuals to be resilient in the face of unexpected expenses, such as the death of a loved one or a medical emergency. Every person should have appropriate insurance based on his age, income, number of dependents and risk exposure etc.

7. Have Sufficient Retirement Savings:

In today’s world when even government employees don’t have fixed benefits plan it is all more important to have Retirement savings looking at the socio economic structure and inflation. We all need to have sufficient retirement kitty as our longevity of age is also going up.

To keep our mind fit we need to be stress free. Financial wellness is the most important factor to remain stress free hence we all need to ensure that along with our body and mind we are financially fit also.