Financially Healthy??? Some crucial facts

We need to assess financial health to ensure the achievement of all goals. The following numbers acts as mile markers to help know if we are saving enough.

• Savings-to income ratio: If you are in your 30s, you should strive for a 1:1 ratio between liquid assets and annual income. Liquid assets include your investments and savings not home as it can't be converted to cash easily. In other words, a 35-year-old making Rs 6 lakh annually should have the same amount in savings.

    The ratio, according to standard wisdom, increases with age. For a couple aged 40, it should be     around 1.5 or higher. At 45 years, the ratio should be around 3, and at 50, it should be 4.5. The ratio   will give you a good idea if you are saving enough to reach your retirement goal.

• Years to save tax on sale of property: You can claim tax exemption under Section 54 on the long-term capital gain (LTCG) from the sale of a house if you use the entire profit to buy another house within two years. If you had already bought a second house within a year before selling the first one, you could still avail of the tax exemption.

• 3 months' expenses in an emergency fund: A contingency fund should cover eventualities such as job loss or medical issues. To many, salting away three months of living expenses seems impossible. Remember not to put this fund in your regular bank account. Stash the contingency cash in liquid funds or a separate savings account. You won't earn a high interest, but it will be easier to access when you really need it.

• 10 times the annual income is your life insurance: As a general rule, you should have life insurance that is about 10 times your annual earning. So, if your annual salary is Rs 6 lakh, you should have life insurance worth Rs 60 lakh. However, your insurance needs will vary based on other factors, such as your age, liability and debt.

• 15% Savings rate: Although this figure used to be a minimum of 10%, experts now endorse a savings rate of up to 15%. Sub-divide this into 10% for retirement and 5% for short-term saving like a vacation. The rule is also expressed as a ratio of 90:10 or 85:15, wherein you spend the first figure and save the second.