The pandemic has made us realize how important it is to be prepared to meet a crisis. While we try to make ends meet during this time of uncertainty, we’re constantly left wondering whether we’re financially equipped to fight a situation.
It’s true that the pandemic has made people take their finances seriously. Knowing where you stand in the financial abyss, you need to be ready for what you are going to be facing in the future.
There are several different ways one can check their financial health and be ahead of the crisis. To start with, here are a few questions to ask yourself to see how financially sound you are.
- What is your income source and frequency?
The first question you need to ask yourself is about the money you are earning. It may be your salary, a return on investment or any form of profit earned from your business. All of these are considered as your incomes. These incomes will determine how much you can spend. You also need to ask yourself how often your investments are giving returns, and how frequently you are getting a salary. It is important to ask this question in order to determine a pattern of income which can help you use the money wisely.
- How much do you spend?
While many people spend their income on their needs and wants, one has to ask how much they can spend on a specific goal. You need to plan how you spend your funds so that you have stability even if a sudden expense occurs. The best way to be safe from such risks is to spend according to a predetermined plan that you have set up for yourself. If you follow the money management rule, it will effectively help you determine your income and make efficient use of it.
- How much debt do you have to pay?
The word debt can cause uneasy feelings and create anxiety. Debt management is an important part of being financially and mentally healthy as too much of a loan can put you under a lot of stress. So check how much you owe and plan to reduce its burden as soon as you can. Remember, being debt free is a great stress reliever and will help you grow financially stronger.
- Do I have funds for emergencies?
The core aspect of a financial plan is putting cash away for emergencies. Uncertainty will leave you with no choice but to drown in debt. To avoid this, you can start saving money for emergencies. You can start small and be consistent. You could also consider insurance for your family, which is a smaller expense.
- Are your risks covered? (Insurance)
Being insured is one of the best ways to be safe from the uncertainty that life brings. Returns may vary for each investment. While being insured is an additional expense from your pocket, it will help you in times of emergencies like pandemics, economic recessions, inflation or any other form of a problem you face with your income stream.
These are the few crucial questions that will help you know where you stand as far as money management is concerned. It’s important to have the right financial plan to get through circumstances stress-free, and with minimum damage to your lifestyle. Do you think you are financially healthy? Leaving you with this food for thought for the time being.