A Financial Health Check Tool developed by M. Pattabiraman is now available at SEBI’s Investor Education Portal. A prototype was tested in Jan 2023 with members of the Facebook group Asan Ideas for Wealth, and their feedback was implemented.
Later, the SEBI Investor Protection Education Fund Advisory Committee gave further feedback, and the tool has now been included in the revamped Investor Education Portal.
Readers may recall that nine freefincal calculators are already part of the SEBI investor education website. Since then, video tutorials by M. Pattabiraman for a few calculators have also been uploaded. All the calculators can be found here: https://investor.sebi.gov.in/calculators/index.html.
Link to the financial health check tool. We recommend using the tool on a desktop or a laptop. On mobile, you may have to scroll right to see the buttons as the page is not yet responsive (feedback sent to the SEBI team). This tally version may be easier to use on mobile.
This is a screenshot of Financial Tools and Calculators at the Sebi Investor Education Portal. Nice of the tools first developed for the CNBC TV-18 book, You Can Be Rich Too With Goal-Based Investing, written by P. V Subramanyam and M. Pattabiramam. The tools can also be accessed here: freefincal.com/goalbasedinvesting
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The financial health check asks questions like:
- Do you have anyone who depends on you financially?
- Do you have life insurance cover for at least 15 to 20 times your annual income?
- Do you have health insurance for yourself and all your dependents (if applicable)?
- How well are you aware of the features, terms and conditions of your health insurance cover?
- How well can you handle sudden, unexpected expenses?
- If you have a credit card do you manage to pay the bill in full before the due date each month?
- Do you have any personal loans or any unsecured loans?
- Is the total EMI you pay towards the home loan, car loan, personal loan etc., greater than 40% of your monthly take-home pay?
- Do you create a budget for your income?
- Have you calculated the corpus needed for you to retire comfortably?
- Are you investing enough for retirement?
- Have you shared the details of your investments with your spouse/children/or other dependents (as applicable/relevant)?
- Have you added nomination details to all your investments?
- Have you made a will?
The tool offers a suggestion immediately after the user completes each question, like the one below.
A consolidated report such as this is presented to the user at the end of the questionnaire.
Financial Health Check Report (Sample)
Areas Of Concern
- As you don’t have any health insurance, it is recommended to purchase a personal health insurance policy for at least Rs. 5 lakhs to 50% of your annual income (which is the higher)
- As you are not able to handle sudden, unexpected expenses, it is recommended for you to build an emergency fund over the next few months from which you can withdraw immediately (e.g. a savings bank account other than your salary account or main account). The emergency fund should at least be six times your monthly expenses.
- As you don’t have a budget, it is recommended that you set a budget for income and expenditure each month. You can allocate a maximum target amount that can be spent for different ‘needs’ and ‘wants’. The goal is to not exceed the amount set as a target for ‘wants’.
- As you have not calculated the corpus needed for you to retire comfortably, you may use the financial goal planner available on SEBI Investor Website to plan for your retirement and other financial goals. Delaying this exercise can be quite expensive as the total investment amount increases by 10-12% for each year of delay.
- As you haven’t shared the details of your investments with your spouse/children/or other dependents, it is recommended to discuss your investments with them so that they do not suffer in case you are incapacitated / unable to manage your money
- As you haven’t added nomination details to all your investments, it is recommended you do this immediately! This is a crucial step to ensure your loved ones have easy access to your investments in the event of your demise.
A nomination alone is not enough to ensure your assets are distributed to your kin as per your wishes. The provisions of a Will prevail over the nomination. Therefore, it is recommended to create a Will and ensure that beneficiaries in the Will are also the nominees (when possible) for smooth disbursement of the amount.
Areas Displaying Good Financial Health
- It is Great that you have life insurance cover for at least 15 to 20 times your annual income. Life insurance is a key component of financial security.
It is Fantastic that you manage to pay your credit card bill in full before due date each month. - It is Fantastic that you have no personal / unsecured loans.
- It is Great that your total EMI towards the home loan, car loan, personal loan etc., is less than 40% of your monthly take-home pay. It is recommended that you continue to keep debt as low as possible as it is the first step towards building wealth.
- It is great that you have invested enough for your financial independence after retirement.
Do give the tool a try.
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