Put yourself at ease by protecting those you love
05 January 2023
The small lull we get between December and January is the best time to look back to what happened over the past 12 months. Arguably, one of the most important life aspects to look back is your financial health.
Start the new year right by sorting out your financial health and identifying what your next steps should be. This piece will provide you with a step-by-step approach to help you identify where you stand financially, so you can make better financial decisions moving forward.
What is Financial Health?
The words are self-explanatory, but having a clear definition of what financial health is can help prepare you for the process of achieving it. Financial health defines the condition of a person’s monetary affairs. While it’s easy to think of financial health as the current state of your savings account, there are more things to account for.
Other factors that contribute to your financial health include your investments, insurance policy coverage, and spending habits. When it comes to financial health, no one person has the same situation. The things you should focus on regarding your financial health will greatly depend on personal circumstances such as your life stage, future goals, and so on.
A Guide to Performing a Personal Financial Health Check
In this post, we’ll present a detailed approach to making a personal financial health check. You can add or remove steps in the process to fit your specific needs, but these steps are critical if you want to have a clear picture of your financial health.
Review your finances this year
Calculate how much money you earned over the year and identify the leading source of your expenses. This step will be a lot easier if you have a written budget and an expense tracker that you keep religiously.
If you notice that your expenses are higher than your income, consider making changes to your lifestyle. Perhaps you can tighten your leash on your expenses or look for ways to boost your income.
Check your savings account
The most direct way of diagnosing your financial health is to have a thorough look at your savings account. Ideally, most of your money is saved in this account, so it’s a good practice to check its status to ascertain your financial health. Through your savings account, you can get a clear picture of how much disposable income you have on hand.
How often do you put money in your bank account? Were you able to make consistent contributions to your savings, or was it done haphazardly? Reflecting on your saving habits can help you correct your course later on.
Check your investment portfolio
If you’re smart about your money, you understand the importance of investing your money in various instruments. That is putting all of your eggs in one basket is the quickest way to lose cash. Stay on top of your investments by reviewing the risks you can afford to narrow down the viable markets that you can invest in.
You should also review which of your investments are winners and losers, then make a decision: should you cut your losses or hold? Stay true to your investment goals and remove emotion from the equation.
Account for all existing liabilities
As mentioned, knowing where you’re spending your money is vital in assessing your finances. Check your bills if you have anything you can deduct from your spendings. If you don’t watch that much Netflix, maybe it’s in your wallet’s best interest to end your subscription.
As much as possible, you should not have any outstanding balances for loans you’ve taken, as that means carrying over loan payments into the coming year. If zero balance is not achievable, ensure that you don’t take on new loans to keep your liabilities at manageable levels.
Figure out your net worth
Once you have a clear understanding of your finances, you can then look into your net worth. Calculating this only requires a simple formula: add the respective values of your savings and investments before subtracting your liabilities from the total.
Knowing the exact figure of your net worth is one way to determine how your lifestyle is affecting your financial health. If you have a specific financial goal, your net worth can give you an idea of how close or far you are from achieving it.
Look into your credit score
Your credit score is another barometer of your financial health. Since there is no way of knowing when you may suddenly need cash, the ability to quickly get approved for a loan can be helpful.
While finding out your credit score sounds intimidating, the process of knowing it is relatively simple. Use the CIBIApp to get a better idea about your credit score or send them an email!
Think about your insurance situation
Another great sign of financial health is having an operational insurance policy. There are plenty of policies available in the market that offer varying levels of protection. From life and VUL policies to HMOs and health insurance products, there are plenty of options to choose from.
If you’re looking for a reliable policy, consider getting BPI AIA’s Build Life Plus. Build Life Plus is a combination of a savings account and a life insurance plan that allows you to grow your money and provide a safeguard for your future.
Start the Year Right Financially
Everyone makes resolutions, and, understandably, not everyone can follow through with their declarations. However, understanding your financial position is something you should seriously consider to ensure you can make sound, healthy decisions for yourself and your family.
If you need professional guide on how to do a more comprehensive financial health check, talk to our agents at BPI AIA. Our team is more than happy to address your concerns.
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