Each person has a unique benchmark to decide whether or not he/she has a good financial future. Here are 5 parameters which will help you make your decision.
- One of your incomes is enough to make your monthly fixed expenses - If you and your spouse both have a stable income, then one of your incomes should be enough to cover your monthly fixed expenses. It is better if any of your incomes is sufficient to do so; however, if one of your incomes is sufficient, then also, you are in good condition. In this way, you can use the other income to build a secured financial future and take care of your extra expenses every month.
- You have to make only one care payment every month - Restricting your monthly car payments to only one, you can make your financial future better since you won't have to worry about a sudden financial emergency, which can make it difficult for you to make the necessary car payments. If required, you can create a car replacement account so that you can accumulate enough money to make the down payment at least, while replacing your old car with a new one.
- You are able to save more than 10% of your annual income - Saving 10% of your monthly income is a pre-requisite. However, saving more than 10% of your annual income will make you financially healthier and help you enjoy a stress-free life. So, take advantage of the opportunity and try to save in the months when you don't have any financial emergency or you don't plan any holidays. If you do so, you can ensure yourself a better lifestyle even after your retirement.
- The value of your home is twice your annual income - You are obviously in a better position if the value of your property is more than twice of your income and you don't carry more than 80% of your home value as a loan. This ensures that you don't carry much mortgage debt.
- You can accumulate about 3 times of your annual income by age 40 - Can you calculate whether or not you'd be able to accumulate about 2-3 times of your annual income by the age of 40? If yes, then you're on the right track. If you are in your 40s but haven't been able to do it yet, then you can consult a financial adviser to get suggestions on how to do so. You can base your annual income on what you're getting now and make a financial plan to achieve the target amount within a due date.
Following all these 5 strategies will help you build a better financial future and help you enjoy a stress free happy life. Remember the decisions you're making today will build your future. So, plan your financial future carefully.