If
you are approaching 30 or have already hit
this milestone,
you are at an important juncture of your life. You probably have a better idea
of your career and finances than you had when you were in your early 20s.
Now
is the opportunity to put all your acquired wisdom to work and create long term
wealth.
Here
are five checks to know exactly where you stand financially and what to do
next.
- The net worth check:
Do
you really know what you are worth – what you own versus what you owe? To find
out, take everything you own- bank accounts, any stocks or mutual funds, fixed
deposits, house, valuables (jewellery), etc. From this subtract all your loans.
The result is a rough estimate of your net worth.
Taking
this further, take your annual income and from it subtract your annual
expenses. That is the money you are adding to your net worth each year. If you
are servicing some large loans, you might have a negative net worth. Turning
this positive should be your first major goal.
Why
you should do this check? Knowing what you are financially worth tells you if
your financial decision making is in the right direction. It is also a good
wake-up call.
2.
The career check:
Ask
yourself the following questions:
- Do you like your job?
- How much have you been earning and
how has your income grown?
- Are your skills up to date?
- How much are you likely to increase your salary by each year?
If
your answers are generally positive, then you are on the right path, career
wise.
Why
you should do this check? Your career is your primary
source of income. Knowing where you stand on the progression scale and having
at least a rough idea about your future prospects will tell you what kind of
financial comfort level you are likely to have.
3.
The health check:
How
much have you been spending on medical expenses? Do you have health insurance?
At this stage you might not have any major health related expenses. This could
change in the future.
Why
you should do this check? Medical bills and hospitalization are some
of the biggest unexpected expenses. Having a health insurance saves you a major
financial burden.
4.
The doomsday check:
Do
you have enough savings to last you for at least 3-6 months? What If you lost
your source of income tomorrow? If you are not prepared for a worst case
scenario then it is time to start an emergency fund.
Why
you should do this check? Today’s job and economic situation is an
uncertain one. Having a fund specifically meant for unexpected scenarios can
not only give you peace of mind but also ensure financial comfort.
5.
The long term preparation check:
Real
wealth takes time to create. Do you know how much you will likely need to
retire? Have you been making investments in long term instruments like equity?
If you have, then how much do you have saved up in high return instruments such
as equity mutual funds or direct equity?
If
you like other instruments how much have you saved in Bank FDs, or debt funds?
Why
you should do this check? Wealth creation is a time taking process
and the earlier you start the bigger your prospective corpus, thanks to compounding. Regularly saving and
channeling them into the right instruments makes sure that you will have a
comfortable retirement.
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