If you are approaching 30 or have already hit this milestone, you are at an important juncture of your life. You probably have a better idea of your career and finances than you had when you were in your early 20s.
Now is the opportunity to put all your acquired wisdom to work and create long term wealth.
Here are five checks to know exactly where you stand financially and what to do next.
- The net worth check:
Do you really know what you are worth – what you own versus what you owe? To find out, take everything you own- bank accounts, any stocks or mutual funds, fixed deposits, house, valuables (jewelry), etc. From this subtract all your loans. The result is a rough estimate of your net worth.
Taking this further, take your annual income and from it subtract your annual expenses. That is the money you are adding to your net worth each year. If you are servicing some large loans, you might have a negative net worth. Turning this positive should be your first major goal.
Why should you do this check? Knowing what you are financially worth tells you if your financial decision making is in the right direction. It is also a good wake-up call.
- The career check:
Ask yourself the following questions:
- Do you like your job?
- How much have you been earning and how has your income grown?
- Are your skills up to date?
- How much are you likely to increase your salary by each year?
If your answers are generally positive, then you are on the right path, career wise.
Why should you do this check? Your career is your primary source of income. Knowing where you stand on the progression scale and having at least a rough idea about your future prospects will tell you what kind of financial comfort level you are likely to have.
- The health check:
How much have you been spending on medical expenses? Do you have health insurance? At this stage, you might not have any major health related expenses. This could change in the future.
Why should you do this check? Medical bills and hospitalization are some of the biggest unexpected expenses. Having a health insurance saves you a major financial burden.
- The doomsday check:
Do you have enough savings to last you for at least 3-6 months? What If you lost your source of income tomorrow? If you are not prepared for a worst case scenario then it is time to start an emergency fund.
Why should you do this check? Today’s job and economic situation is an uncertain one. Having a fund specifically meant for unexpected scenarios can not only give you peace of mind but also ensure financial comfort.
- The long term preparation check:
Real wealth takes time to create. Do you know how much you will likely need to retire comfortably? Have you been making investments in long term instruments like equity? If you have, then how much do you have saved up in high return instruments such as equity mutual funds or direct equity?
If you like other instruments how much have you saved in Bank FDs, or debt funds?
Why should you do this check? Wealth creation is a time taking process and the earlier you start the bigger your prospective corpus, thanks to compounding. Regularly saving and channeling them into the right instruments makes sure that you will have a comfortable retirement.