A financially healthy person has these 5 traits – Do you?

A financially healthy person might not be rich. But he or she certainly don’t worry much about financial disaster because preparation is always made for rainy days. To assess whether you are financially healthy, see if you can answer “yes” to all the below questions.

1. Do you live below your means?

You want to always make sure that you earn more than you spend. What’s left is the savings. So it is important to know your earning capability and not to spend over the limit. But don’t get me wrong that you have to be extremely frugal. That will suck out all the fun of living life.

In other words, it is not wrong to expand your means – getting a new car, moving to a bigger house, getting an iPhone 6 Plus etc – you just need to make sure your earning capability can cope with that “expansion”.

Living below your means can go a very long way, and in fact is one of the trait of the most successful investor on earth. Warren Buffett still lives in his small cottage bought decades ago, although he is worth multi-billion dollar.

2. Do you have a budget plan?

Budget is essential so that you have a plan to follow through. Understand that a financially healthy person don’t spend money based on her feeling. You won’t splurge on clothes when you are angry. You won’t spend even more when you are feeling good to own certain luxury items.

This trait has to be practised and turned into a habit of always knowing where your money goes. Then you will have the discipline to create a budget. Following a budget will keep you out of debt, all the time.

3. Do you have enough buffer?

When you have enough money sitting somewhere liquid that can last you for quite a long time, that means you have enough emergency fund to cater for anything unplanned. It is advisable to have 3-6 months of your expenses hoarded somewhere. Instruments like Fixed Deposit and Fixed Income Fund is a great place to start. Some investors and business owners are more creative and they might have overdraft facility for the emergency situation.

Believe it or not, those who has money tends to walk with pride and confident. Sense of security comes from how much money you have in the bank, not how much you hang on your body (think of the nice suits, watch, handbag and accessories).

4. Do you have adequate insurance?

There are several types of life insurance policyholders – the over-insured, the adequately insured, the under-insured and also the wrongly-insured. If you are over-insured or wrongly insured, you might be paying too much insurance premium and it affects your ability to grow your money when you are safe and sound. But for those under-insured, they are exposed to even more risk. For example, any of those life-threatening mishaps like critical illness, major road accident, and premature death may deplete your wealth within days.

So buy enough insurance and it should also cover everybody in your family that depends on your financial support. When it comes to risk management, you don’t want to take any chances.

5. Do you sleep well at night?

Other than health problems that is causing insomnia, mental stress is also a major contributing factor. This stress somehow is related to money worries. If you have a lot of credit card debts to be settled, if you have invested wrongly and lose a lot of money, if you have major financial commitments that requires large amount of fund such as in the event of paying medical bills for family members, you will most likely having a hard time to sleep well at night.

If you have say “yes” to the first four questions, you will most likely say yes to the fifth. If not, there might be some health or relationship issue troubling you.

Hopefully you have demonstrated these common traits of a financially healthy person. Remember, some young people lose their health to gain wealth. There are also some old people losing their wealth to gain back health. You really don’t want to be in either of the group.