Is your financial life heading for a disaster?

The condition of an individual's financial life is not apparent only based on the income he earns. Sometimes, even after earning well, your financial life may not be in the best of colour. Many people are also comfortable living in the assumption that all is well. However, there are some broad signs or indicators which will tell you that your financial life is in trouble. Remember that the more valid these signs are, the more are the chances that you are heading towards financial disaster, and the more critical it is for you to take proactive steps to rectify the problem. Let's look at some indicators which tell you that your financial life is in trouble:

You cannot survive without an income for 3 months: Income is different from wealth. It is seen many a time that people earn pretty well, but if they lose their job suddenly, they are grappling for even the basic expenses. This is because they have not saved up enough to meet contingencies. If you have been working or in a business for a few years, then you should have a good back up in place which will help you survive for atleast for 3 months. When your expenses are very high and you do not have much left even when you are earning, you are stepping in to financial disaster. This is the first indicator to show that your financial position is shaky.

You pay high EMIs on depreciating assets: Having too many liabilities on your books is not good. It is worse if you have debt which does not result in an appreciation of your assets. For instance, having high amount of personal loans, credit card debt or even car loans which result in high EMI outflow from your monthly salary is a very unhealthy practice. As a thumb rule, your total EMI outflow should not exceed 40% of your monthly take home pay. If you have a home loan, the EMI towards this will constitute a sizeable portion. It is therefore better to avoid other kind of debt which does not increase your asset value. When you realise you are paying high EMIs on depreciating assets, this is another indicator of financial trouble.

It is not easy to get a better paying job with the skills you possess: Professionally, you must grow and advance in your career, such that it translates to better income and higher savings. However, if you find that you are not able to move upwards in your career despite repeated attempts, it means that you are going to be stuck with the same salary every year, or be happy with a small hike. This is turn means that your investments will be limited, resulting in limited wealth building opportunities. Take a proactive step in honing your skills and building your career for a better financial life as well.