Assessment of your Financial Fitness

Discipline: What are the ways in which you spend and save?

  • Net Income: Should grow each year by at least 7% to 9% to keep up with inflation. Maintain multiple sources of income, both active and passive.
  • The 50-30-20 rule: Allocate 50% of your income for need-based expenses, 30% for want based, and the remaining 20% for savings.

Preparedness: How prepared are you to weather financial shocks?

  • Liquidity: A thumb rule is to keep 6 months of expenses in liquid savings

Persistence: Your ability to manage debt and pursue essential life goals

  • Debt to income (DTI) ratio: Ideal DTI ratio should be 30% or under
  • Credit Score: Higher your credit score (CIBIL or equivalent), the better your chances of securing credit from Banks & NFBCs.

Check the health of your wealth!

You are financially fit when you:

  • Maintain a balance between income & spends
  • Build and keep adequate reserves
  • Prioritize saving & investments over spending.
  • Have the ability to recover from a financial shock
  • Can service existing debts & have access to additional credit
  • Effectively deploy a range of financial instruments

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