Financial well-being or Financial Health (the way we would like to look at it) is one of the most undermined aspects amongst Indians. We give more importance or take more pride in being physically and mentally fit but assign scant respect to Financial Health. Financial Health is the easiest amongst this Health Trinity (physical, emotional and financial) to both understand and implement. Also, it is the only one which has a positive rub-off effect on the other two.


Interestingly, to become physically and emotionally healthy one has to monitor a lot of parameters or variables. However, when it comes to finance these variables are less than a handful. Financial Health variables remain consistent unlike the parameters involving physical and emotional health.


According to us there are three simple aspects an individual needs to focus on to develop one’s financial health.



  • Be on top of expenses and lifestyle costs



  • Understand the role of interest rates on equity and debt



  • Take risk mitigation steps


Be on top of expenses and lifestyle costs


Each and every individual is different when it comes to their lifestyle expenses. While one could try and fit them into broad buckets, their needs and requirements as well as how they want to spend their savings and live their twilight years would be different.


Even so, how much they want to spend on their kids' education and marriage, family vacation and maintaining their social status would also differ.


Two individuals of the same age, qualifications, designation, job profile and in the same organization could be earning the same salary but their lifestyle could be totally different. One could be saving 30 per cent of his/her income while the other could be even taking loans to maintain his/her lifestyle.


Lifestyle costs also determine the quantum of money one can spend towards financial goals. For example, An Individual with meagre livelihood is unlikely to fund his child’s education by sending them abroad and nor will he/she spend a huge amount on their marriage. His vacations, hobbies, entertainment, gadgets etc will also be of low key.


Hence, an individual has to be on top of their lifestyle costs to understand how much he needs to maintain both lifestyle as well as financial (milestone) goals. This is the cornerstone and basic foundation based on which any financial plan is built.


Understand the role of interest rates on equity and debt


Every asset class (equity or debt or commodity or real estate etc) has a certain underlying science which drives their performance in terms of returns.


Every individual needs to just have a basic level knowledge of this science behind their respective chosen asset class.


Remember, investing is not a guarantee of profits, and all investments carry some level of risk. A solid grasp of the underlying science of your chosen asset class will certainly increase your odds of making prudent investment decisions and achieving your financial goals.


There are individuals who have all asset classes and there are those who have built their fortune by investing in only one asset class. Following or copying others will not help.


Whenever India's 10-year Government Securities’ Yield (G-Sec) touches 9 per cent or above, it subsequently starts falling and return on debt is better than equity.


Similarly, when G-Sec touches 6 per cent or lower, equity starts providing more returns than debt.


Understanding of the science behind different asset classes would help an individual in picking the right instruments to meet their various financial goals. So the importance and duration left to meet the goal would drive the choice of the asset and the right instrument within that asset class. 


Taking risk mitigating steps


Covid has been a grim reminder that unfortunate events can happen anytime. So while we plan and invest in the ”T”, there could be a calamity or an eventuality that could occur. Integrating such risks as part of our financial life is key to having a healthy financial life.


Apart from taking the right term life and medical insurance covers, an individual needs to build an adequate emergency corpus and prepare a WILL to mitigate bulk of the financial health related risks.


Asset allocation, other types of insurance cover, making lifestyle changes etc could be also useful depending on circumstances and individual choices.


If each and every individual imbibes these simple traits then they are certain to live a healthy financial life. In addition they would be better prepared to handle any issues (both professional and personal) as their decision making capabilities would also improve due to their better state of physical, emotional and financial health.


Amitabh Tiwari and K. Shankar are SEBI Registered Investment Advisors 


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