When it comes to managing your finances, tracking the right metrics is essential for maintaining financial stability and achieving long-term goals. Many Indians are unsure of where to start, overwhelmed by the numerous aspects of personal finance. The key is to focus on a few vital financial health metrics that give you a clear picture of where you stand and what actions are needed to ensure a secure future.
This blog will walk you through the 5 financial health metrics every Indian should know. Understanding these metrics will help you make informed decisions, plan for emergencies, reduce debt, and grow wealth. Let's dive in!
1. Understanding Your Assets
Your assets represent your accumulated wealth. In simple terms, assets are everything you own that has financial value. These include your property, investments in the stock market, mutual funds, gold, and other valuables. Tracking your assets is crucial because it reflects your financial position and growth over time.
What Are Assets?
Assets can be broadly categorized into tangible (physical) and intangible (financial) assets. For most Indians, tangible assets include real estate, such as a house or land, and physical gold—both common investments in Indian households. Intangible assets cover investments like mutual funds, fixed deposits, and stocks.
With India's stock market reaching record highs in 2024, driven by strong corporate earnings and the booming tech sector, the value of financial assets has seen unprecedented growth. Domestic investors, through Systematic Investment Plans (SIPs), have fueled much of this rise. Tracking your financial assets in this climate is more critical than ever because even small investments can see significant gains in a rising market.
Why Tracking Assets Matters
Monitoring your assets regularly helps you understand your net worth and financial growth. Assets grow in value over time through appreciation, dividends, and interest. When you keep track of their growth, you’re better positioned to make decisions on selling or holding investments, purchasing new property, or reallocating your investments to achieve your long-term financial goals.
Pro Tip: Use the Sampann Financial Planning App to track all your assets in real-time, whether it’s property, gold, or financial investments. The app allows you to see your asset growth over time, helping you plan better for the future.
2. Managing Your Budget
Creating and sticking to a monthly budget is key to keeping your financial health on track. A budget ensures that your spending is aligned with your income and helps you save for future goals. In India, where EMIs (Equated Monthly Installments) and expenses can quickly add up, a budget acts as a financial compass.
What is a Budget?
A budget is a detailed plan that outlines your income and how you plan to allocate it across various expenses. This includes fixed costs like rent, utilities, and EMIs, as well as variable costs like groceries, dining out, and entertainment.
As of 2024, the Reserve Bank of India’s hike in repo rates has caused a ripple effect, raising loan EMIs for millions of Indian households. Home loans, personal loans, and car loans have all become more expensive, making it even more important to budget efficiently. Keeping your expenses under control while managing increased loan payments is crucial for staying financially healthy in this high-interest-rate environment.
Why You Need a Budget
A well-structured budget provides a snapshot of your financial habits. It helps you identify areas where you may be overspending and allows you to allocate more toward savings or debt repayment. For instance, if you find that EMIs are taking up a significant portion of your income, you can plan to reduce discretionary spending or find ways to lower EMI payments.
Manage your budget easily with the Sampann App, which allows you to track every rupee spent and helps you allocate funds toward your financial goals.
3. Controlling Your Debt
Debt can be a significant financial burden if not managed properly. Whether it’s credit card debt, personal loans, or home loans, knowing how much you owe and tracking your debt is essential for financial health.
What is Debt?
Debt includes all the money you owe to banks, lenders, or other financial institutions. This typically includes EMIs on loans, credit card bills, and outstanding balances on any form of credit. In India, many households juggle multiple forms of debt, from home loans to personal loans and vehicle loans.
Given the RBI’s recent actions on interest rates, many individuals are seeing their loan burdens grow. With rising EMIs, it’s essential to maintain a clear picture of your total debt. Knowing how much you owe and how much of your income is going toward paying off this debt is crucial in preventing a financial crisis.
Why Tracking Debt is Essential
Failing to track your debt could lead to missed payments, which not only affect your credit score but also increase your financial liabilities due to added interest. By closely monitoring your debt, you can also make more informed decisions about refinancing or consolidating loans to reduce your financial burden.
Stay on top of your debt with the Sampann App, which allows you to input all your loans and credit card balances, so you can keep track of your EMIs and outstanding amounts in one place.
4. Building an Emergency Fund
An emergency fund is a financial safety net that covers unexpected expenses, such as medical emergencies or job loss. In India, the lack of a proper emergency fund has often led to financial stress in households, especially during the COVID-19 pandemic.
What is an Emergency Fund?
An emergency fund is a specific amount of money set aside to cover 3–6 months’ worth of expenses in case of unforeseen events. This fund should be easily accessible, typically in a savings account, so you can tap into it quickly during an emergency.
With unpredictable economic situations and rising inflation, having an emergency fund has never been more important. Recent spikes in healthcare costs, along with inflationary pressures on everyday goods, have highlighted the need for financial security.
Why an Emergency Fund is Crucial
Unexpected expenses like medical bills or car repairs can quickly drain your savings. Without an emergency fund, you might find yourself relying on high-interest credit or loans to cover these costs, further worsening your financial situation. Ensuring you have this financial buffer can protect you from debt and keep your long-term goals on track.
Build your emergency fund using Sampann’s financial planning tools, available for free download here. The app helps you calculate exactly how much you should set aside based on your current expenses.
5. Ensuring Adequate Insurance Coverage
The last, but certainly not least, of the financial metrics to track is your insurance coverage. Whether it’s health insurance, life insurance, or any other form of coverage, being adequately insured ensures that you and your family are financially protected in case of an emergency.
What is Insurance Coverage?
Insurance provides financial protection in times of crisis. In India, health and life insurance are the most common types of insurance, but home and vehicle insurance also play a key role in ensuring financial stability during emergencies.
In recent years, the Indian government has launched schemes like Ayushman Bharat to offer affordable health insurance to millions of low-income households. While such programs provide a foundation, having your own individual insurance policies tailored to your needs is essential for comprehensive coverage.
Why You Need Adequate Insurance
Without adequate insurance, an unexpected illness, accident, or death could result in significant financial hardship. Medical costs are on the rise, and even a minor medical emergency could set you back financially if you aren’t covered.
Use the Sampann App to not only track your insurance policies but also plan how much coverage you need to stay financially secure in the long run.
Conclusion
Understanding and tracking these 5 financial health metrics will go a long way in helping you maintain financial stability and achieve your long-term goals. From assets to debt, each of these metrics plays a key role in shaping your financial journey.
Take control of your financial health today! Download the Sampann Financial Planning App for free to manage your investments, budget, debt, and more, all in one place.
Comments