4 Important Steps Towards A Healthy Financial Life

What do you mean by a healthy financial life? It means nothing but to fulfill your dreams and provide a healthy lifestyle and financial security to your family. You can be financially sound with a significant degree of financial planning.

How do you become financially healthy? Are you planning for a family holiday? Do you want to buy a car? Do you have a long bucket list that you need to strike off in a specified period? For your dreams to come to fruition, you must keep track of your savings and expenses in an organized manner.

You should emphasize a financial lifestyle evolution to live a financially healthy life. Healthy financial practices lead to financial stability. It may never be too late to learn how to handle your own money to achieve particular objectives.

How To Assess If You Have Healthy Financial Habits?

In general, it is vital to think about what we should be doing to enhance our financial health and behaviors. We'll go over five major personal finance guidelines that can help you get on track to attaining your financial objectives.

Start Budgeting And Define Your Goals

It is time to get realistic; the first step to determine your personal financial health is to jot down your financial goals. For example, how much money are you willing to spend on different activities, based on how much you earn. Maintaining an e-budget is the best tool to increase your chances of good financial health in the future.

Set up a budget at the beginning of each month to allocate how discretionary money is spent. Track your expenditures during the month and assess if you adhered to the budget at the end of the month. Start by writing down your income and all of your costs, then subtracting the expenses from the income to determine how much money you have left.

Knowing these details can assist you in better budgeting and planning your finances. In addition, you may compare the numbers to your income to determine feasibility.

The aim is not to be too hard on yourself and concentrate on your most essential financial objectives. It's time to create a budget that accounts for savings for retirement, children's education or vacations, as well as day-to-day expenses. You can also change your budget from time to time. It is the first step towards maintaining healthy finances.

Calculate Your Debt To Income Ratio

This step is vital to assess to have a better knowledge of your financial situation and to identify areas of strength and weakness:

Ask yourself the following questions: Has your debt ratio increased or decreased in the past year compared to your income? If it has increased, try to repay the overall debt and stop taking on more debt, that is the key to getting out of debt for good.

Keep Tabs On Your Spending

It is natural to spend more if you earn more. In addition, some expenditures are inevitable when your career and personal circumstances change over time. As a result, there tends to be a corresponding increase in spending, known as lifestyle inflation. In the long term, lifestyle inflation may be detrimental since it inhibits your potential to accumulate money. Every additional dollar you spend today means you'll have less money later in life and retirement.

Therefore, it is crucial to keep tabs on your spending for a healthy financial life. Spend mindfully by evaluating your needs and wants. The objective is to rationalize and accurately label expenses as needs and wants.

After the examination, you’ll know where you are financially, and we've compiled a list of critical practices advised by experts for achieving your objectives and leading a healthy financial life.

Healthy Financial Habits To Imbibe For A Wealthy Life!

Start Investing

After evaluating your budget and defining your goals, setting aside a sizable portion of your income for investing is easy. An appropriate allocation of debt and equity funds can help you reach your financial goals. In addition, you can invest in mutual funds schemes depending on your short-term and long-term goals. SIP can help you to be disciplined and regular in your investments.

Financial Protection Through Insurance

Insurance is a safety net for your rainy day. In addition, financial protection is vital for healthy financial habits. You can devise different investment strategies to protect and secure you and your family. Few options of insurance to consider are:

• Term Insurance
• Health Insurance

You can hire a professional financial advisor to guide you through the policies and premiums before buying an insurance policy. These plans can also assist you with your money by prioritizing your objectives, as focusing on one or two financial goals at a time is frequently more beneficial. For example, buying a house, saving for retirement, and paying for your children's college education should all be part of your financial strategy.

While you may be tempted to save money by skipping insurance, keep in mind that it protects you against misfortunes that might send your finances into a tailspin.

Taxation

You can minimize your taxable income by adopting reasonable investments. Section 80C and 80D are two popular sections for deducting taxes.

Section 80C- You can claim a deduction of up to Rs 1.5 lakh for different investments and expenses under this section. Some of the most popular tax-saving instruments are ELSS or Equity Linked Savings schemes, these are Tax Saving Mutual Funds, Sukanya Samriddhi Yojana (SSY), 5 years saving FD, life insurance premium, children’s tuition fee. Similarly, you can also claim deductions under section 80D on your health insurance premium. However ELSS mutual Funds are the best with minimum lock in of 3 years only.

Build A Retirement Corpus

To be financially healthy, Retirement planning is crucial. And as you know, retirement is expensive. So you need a corpus that is enough to sustain you throughout your life expectancy. Plus, with inflation, or the growth in the price of everyday goods and services, your costs after retirement will be substantially higher than they are now. So, for example, if your monthly expenses are Rs 40,000 right now, they would be Rs 80,000 in 20 years if you want to continue the same standard of living.

The goal is to create revenue even when you're retired. As a result, you might choose an STP or SWP mutual fund strategy to ensure that you have income during your retirement years.

Bottom Line

Maintaining a healthy financial life is a slow process. However, following these four steps will help you develop a healthy financial habit that will lead to financial security and help you achieve your goals.

Frequently Asked Questions

How do you live a healthy financial life?

You must plan and stick to a budget. Be consistent with your savings and investments. Also, diversify your portfolio of investments.

What is the 70 20 10 Rule money?

According to this budgeting rule, you must spend 70% of your earnings on monthly bills and day-to-day expenses. 20% on savings and investments and lastly 10% on repaying debt and loans.

What is a financial lifestyle?

A financial lifestyle has set goals that help you plan and achieve your goals effectively. It also helps maintain a lifestyle that is the right fit for you and your family.

Disclaimer: All Mutual Funds are subject to market risk. Please read all scheme-related documents carefully.