You are conscious of your physical fitness. Are you equally conscious about your financial fitness? This post presents the key elements you need to take care to become financially fit.
“Financial freedom is available to those who learn about it and work for it.” Robert Kiyosaki
At Edelweiss Tokio Life Insurance it is our sustained efforts to make literate people financially literate. Financial literacy is the first step towards Financial Freedom.
Hygiene elements to remain financially fit:
- Know the components of Fitness
To become physically fit, you need to know the critical components of being physically fit. Your heart rate, blood pressure, sugar level, etc. are some of the components which define your physical fitness.
Likewise, you need to know the components of financial fitness. These are your fixed assets, liabilities, assets to liabilities ratio, liquid investments, long-term investments, return on income, the expense to income ratio.
Knowing the implications of all these basic financial terms is important on your journey to becoming financially fit. The following post in the link given below covers the topic in detail.
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- Manage your Income
Become are of your assets. Your assets have the potential to generate income for you. As you are leveraging your education asset to generate income, financial assets can generate income without you working for it.
Asses the income generating potential of all your assets. Activate dormant assets. Redeploy on income generating assets.
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- Manage Your Expenses
Credit Cards, online shopping, multiple options for every product, and EMI options all are the leakage points. It is very difficult to contain expenses in such a scenario.
Yet it is important to manage your expenses. Every penny spends on unwanted things keeps you away from your financial goals. You will have to work extra to earn that unnecessary spend.
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- Saving is Critical
Yes, irrespective of your present good income saving is necessary. If you don’t save a reasonable amount consistently it will not keep you financially fit forever. Saving insures fitness for the future.
There are many avenues to deploy your savings. Here is a link to a post which covers various risk associated with investments schemes.
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- Manage your Taxes
“Death, taxes, and childbirth! There’s never any convenient time for any of them.” Margaret Mitchell, Gone with the Wind
Be that as it may. Taxes are part of our life. It is your important responsibility towards the nation. A financially fit person is regular in tax payments. You have all the rights to avoid taxes by legitimate tax planning but tax evasion is illegal.
Be regular in tax payments. Don’t ignore your tax responsibility. Don’t take it casually. Your financial fitness is not complete without 100% tax compliance.
- Record your Assets & Liabilities
“Historical gap is created due to missing written records.” Lailah Gifty Akita, Think Great: Be Great!
Even our financial gaps are created by missing written records. All your assets and liabilities have to have a written record. In the absence of written records, your generation next might not know about all your investments and assets. Even you might not remember all about your investments in the absence of written records.
Like our ancestors used to keep their assets under the ground and after their death, no one would know about it. Same will be the fate of all your unrecorded assets.
Record keeping is your important responsibility to keep your family financially fit.
- Know the Risk & Return
Not knowing about the risk and return potential of all your investments is critical to your financial fitness.
Ignorance about this can make you financially weak. It can impact your financial fitness considerably.
Today, when every now and then risky investment schemes emerge with the intention to lure and cheat innocence investors, knowing about risk elements of investments, is a mandatory learning.
- Have adequate Life and Health Insurance
Remaining uninsured can keep you vulnerable to sudden life events. Regular risk management process and adequately covering all potential risks with suitable insurance policies is a prerequisite to remain financially fit in all the circumstances.
- Check Your Credit Report
Keep a track on your credit report at CIBIL. If for any reason there is any adverse record which you think is not correct, take action to set the record right.
This will help you whenever you need to borrow money. A mistakenly unclear report is a hurdle in your borrowing needs.
Capacity to borrow as and when required based on your repayment capacity is an important component of financial fitness.
- Educate Your Family Members
Your spouse, children, and everyone dependent on you need to know about your financial affairs. They need to learn to be financially fit. They need to know the good practices of managing personal finance.
“It’s so easy to lose your fitness and so hard to gain it back.” Alex Morgan.
The above quote is true for your financial fitness too. Be proactive to remain financially fit. Be safe than sorry.
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