Wake Up Call

How do you know if you are financially healthy or financially sick?

As doctors, we learn that a person is sick because they come to us with complaints which we call symptoms. It is something that bothers them and causes them problems. But there are also those who have no symptoms at all. However, when they come for a routine medical check-up, they are confronted with a disease that has been evolving silently... thus we call it an incidental fnding.

Same goes with your finances. You will have symptoms that will point to a diseased pocket. And what are these symptoms?

1) Always falling short of funds even before the month ends

2) Having no savings or emergency fund set aside for rainy days

3) Constant fights about money matters

4) Outstanding debts that are not being paid

However, there are also instances when you think you are actually living the affluent life and is financially healthy. How will you know if there is no silent financial disease eating at the bottom of your pocket? The routine financial check up that can diagnose this problem is the SAL and the PIES.

The SALS is the statement of assets and liabilities. You can easily compute for this by listing in one column all your assets to include personal property and their current cash values, savings and investments and retirement savings to include maturity value of pension funds. In another column, list all your liabilities to include personal debts like credit card bill, bank loans and mortgages as well as investment debts like premiums payable for pension fund or educational fund. By subtracting your liabilities from your assets, you will know your NET WORTH. A positive networth will signify financial health while a negative networth signifies a disease eating inside your bones without you being aware of it. Such a silent financial disease if not diagnosed this way will emerge as an "incidental finding" when a crisis suddenly hits the family like death of the principal breadwinner or sickness and disability in the family.

The PIES on the other hand stands for Personal Income and Expense Statement. This way you can determine your cash flow every month. Keeping track of all your monthly income, whether fixed or variable and listing down all your expenses every month and subtracting your expense from your income will show if you are living beyond your means, within your means or below your means.

Another way of determining if you are living a financially healthy life is by looking at your financial behavior. If you regularly set aside at least 10% of your income every month to an emergency fund or savings and investment fund, then you are financially fit. This is akin to exercising regularly to keep yourself fit. However, if you are the type who really do not care where your money goes and live as though there is no end to the money supply, then you are living a dangerously precarious financial life.

This honest self-appraisal and self-assessment is a must if you really want to know if you are financially fit or sick.

The earlier you go about this exercise, the better because preventive measure is always better than curative. As in any form of disease, it is best to treat the problem when it is still not in its advanced stage. Do not procrastinate!