Last Updated on November 8, 2017
Financial health refers to ‘where we stand today’ with respect to our finances and what we need to do in the coming years to handle future expenses and financial goals.
In this post, I would like to describe a simple exercise to assess our personal financial health. This process can be automated with the integrated financial planning template.
The process in which expenses, investment amount needed for financial goals, along with expected salary are projected into the future was a pivotal exercise in my financial learning curve.
The idea is to create a table with the following entries:
- We take our current salary and project it in future with some reasonable growth rate.
- Do the same with current expenses with an assumed inflation rate
- Determine the total investment amount required for all out goals and if possible increase it at some rate for the coming years.
- Determine the amount that we can invest each month – now and in future (increased or decreased at some rate).
- Consider any current and future liabilities.
We might end up with something like this. This is a screenshot from the above-mentioned financial planning template.
The red cells are those years when we will be investing less than required for our goals. If there are too many red cells, then goal priorities and inputs may have to be altered.
This exercise can be a confidence booster for a few and scary for many – including me.
- This is only a projection with assumed inputs. The future can turn out better (or ..) than this.
- If we keep out head down and invest systematically with a solid strategy in place, with a bit of luck, and in time, the number of red cells may come down.
- I did not lose sight of this hope when I first did this exercise 6 years ago, and I would urge you to do the same.
- Like any other goal-planning exercise, it is important to do this assessment once a year.
- In some cases, the red cells (inability to invest enough) can be reduced with small changes in lifestyle.
After I did this exercise, I had a clear idea of where I stand and what I can hope for in future. To be frank, I was disappointed that a couple of my wants could not be accommodated after accounting for my needs. Well, we can’t have everything, can we?
Use the freefincal robo advisory template
or
Download the Integrated Financial Planning Template
Do share if you found this useful
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video! ⇐ More than 640 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 2525 investors and advisors are part of our exclusive Facebook Group! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 585 salaried employees, entrepreneurs and financial advisors are part of our exclusive Facebook Group! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group!
My new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author
M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] comAbout freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)