How to self diagnose your financial issues
We’ve all learnt to do the cancer checks, understand the calorie count of an item and regulate our own exercise. Those of us who have our vices have learnt whether or not were addicted to our poison by answering some of those enlightening questions- Do you light up a cigarette as soon as you wake up? How many drinks do you have a week? Some of us take self-diagnosis to an extreme level, involving the Internet, an extreme level of hypochondria and rare diseases with long names we can’t pronounce.
But what about our financial health? Can we diagnose our symptoms? Can we truly take check of how healthy our savings are? Tara Siegel Bernard at the New York Times asks the same questions. As she says, a financial planner doesn’t measure up good and bad cholesterol, they look at good debts (mortgage) and bad debts (those damn credit cards). If you can’t afford a financial planner check-up, then the kind folk at The Times have done some research for us. These are the questions you should be asking yourself to ascertain your financial well-being.
Is my net worth growing?
Simple, straight to the point, and always a good indicator. We all have our excuses and emergancies, but at the end of every year, you want your net worth to be looking positive. The calculation is simple- deduct what you owe from what you own. Therefore, even if your assets aren’t growing, if you are paying down debt, then your net worth is increasing.
Financial planners suggested that understanding net worth is always a good way to tell is someone is living within their means, saving money and on a positive path towards achieving financial goals.
Decreasing net worth happens, and sometimes debts jump because of a necessary expenditure (like education) but if there’s no valid reason, you might need to think about how to reign in your debt.
How are your ratios?
Ah, ratios. Little percentages that rule our life. It’s funny how large debt can seem, even when we’re only dedicating 30% of our income to paying it off. Ratios also vary according to where you are in life. Financial planners interviewed by Bernard suggested that you should dedicate no more than 30% of your gross income to paying down debt when you’re young, and that should be at zero by the time you retire. Everyone should aim to save 15% of their income, a number which would hopefully increase when you’re getting closer to retirement. Your emergency fund should be between 3 months and 6 months worth of expenses.
Are you spending more than you earn?
A good question to ask yourself, at the end of the week/ month/ year. That way lies madness, don’t let it happen to you.
What changed in your life last year?
Re-evaluating your finances in light of having a life-changing event is necessary. Having a savings plan is fantastic, but revisiting it often is just as important. Gotten married? Had a child? Lost your job? Keeping your budget flexible and up to date will make your life easier, and your finances healthier.
Am I properly insured?
Once a year, do a stocktake of your insurance. Does it cover everything? Does it insure the right amount of income? Don’t leave yourself in a pickle because your insurance is out of date.
How are you sleeping? Are you happy?
Having a financial plan that makes you happy is just as important as one that improves your finances. Keep your wellbeing in mind.
How do you assess your financial health?
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