Diagnostic tools for your financial well being -

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Yes you can find out about your financial health by answering a few questions yourself. Financial advisor's call them ratios. However before starting the ratio analysis, one must have a family budget in place. One should also have a list of assets and liabilities.

1. The first ratio is liquidity ratio. this ratio will help you figure out how much liquid cash you have if you need the money in an emergency. You should have cash for at least four months expenses. This will come in handy if you have an emergency like, unexpectedly loosing your job or heavy loss in business.

2. The next question is how much you save from your salary? This one is easy to answer. What it yields is the savings ratio, which would give you an rough idea whether you're saving enough for your future needs.

3. The next step is to find out how much of your income used up to pay off any loans that you may have taken for various purposes. You should have enough insurance cover to take care of your liabilities.

4.Do you know how much you are worth? Do a rough mental calculation. Add up all your assets to figure out your total worth. Now compare your total worth to total liabilities to get your solvency ratio.

Next question is what your assets are doing for you. You may have created lots of assets, but are they generating any income? perhaps you don't need extra income now, but it becomes crucial as you near retirement.

These simple questions can give you rough idea about your financial well being, If you find everything is in order, there is no need for you to rush to see a financial doctor. otherwise, don't waste time. Run!
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