How to Monitor Your Financial Progress

Once you have defined your financial goals, it’s important to keep checking your progress, to see if you’re on track. This way, you can change course or revise your strategy if you feel like you’re falling behind. Here are some tools and metrics that you can use to evaluate your financial progress and know where you stand:
Apr 2023
5 mins read
Net Worth
Your net worth is rather like a company’s balance sheet, providing a snapshot of your financial position and summarising all the financial decisions made so far. It is calculated by subtracting your liabilities from your assets. If you have a positive net worth, your expenditures are well-planned and largely under control. If you have a steadily growing positive net worth, it shows that you are building a corpus.
Net worth can also be a good indicator of how your investments are performing. If your investments are doing well, your assets will exceed your debt levels. A positive net worth is also an indicator that you are constantly clearing off your liabilities. As you work towards financial security, keep boosting your net worth to help you stay on track.

Retirement Planning Tools
It’s important to set retirement goals, if you haven’t already, and then evaluate them annually. In India, there are many retirement-focused financial options such as PF, PPF and NPS. You can check the status of your retirement savings on the portals of your chosen financial services provider.
Retirement planning experts can help you assess your finances, but you can use simpler tools to assess them yourself. For example, you could evaluate your retirement savings using the 15% thumb rule – save 15% of your annual income (pre-tax) towards a retirement corpus every year.* But try to aim even higher if you can, and remember to take inflation into account when making your retirement plan.

Credit Score
Your credit report is like a health check-up for your finances – do it soon, and do it often. A credit report is a record of open creditor accounts, including loans and credit cards, summed up in a ‘credit score’. These credit scores are available from companies such as CIBIL, either for free or on a subscription basis. Your score will help you evaluate your credit track record and enable you to assess your financial health. It’s also important to have a good credit score if you want to take a loan. Sometimes, there might be a mismatch between what is shown in the credit report and your actual payment status, so it’s important to check your score often and correct discrepancies immediately.

One of the most important markers of financial progress is a change in your debt levels. Has your total debt increased or reduced? Have you taken a new loan in the last year or two? Being able to pay back debts is always a good sign of progress. If your repayment is getting faster, you are on track to achieve your financial goals.
Of course, you often take on debt to help achieve a larger goal. There are two important factors in evaluating the role of debt in your financial progress: your requirements and your tendency to take debt. Assessing your requirements means asking yourself what you need the debt for, and how it fits into your short- and long-term goals. Your tendency is more subjective – some people prefer debt, while others don’t, so you should know where you lie on the spectrum.

To assess the quality of your savings, keep three things in mind: needs, type and returns. First, check if your savings are enough to take care of your short-term needs and any emergencies. Ideally, set aside 6-12 months’ worth of your income in an emergency corpus for a rainy day. Second, evaluate the instruments where you keep your savings. Avoid keeping all your savings in a single instrument—go for a mix of instruments. Third, consider whether your savings are earning the best returns possible, and whether you need to look for alternatives. The strength of your savings portfolio is a major determinant of your progress towards your financial goals.

Any assessment of your financial goals is incomplete without analysing your investment portfolio. Rebalance your portfolio periodically to meet your changing needs and ensure it keeps delivering good returns. Tax exemption, healthcare and insurance coverage and asset-building are all good reasons to review the composition of your investments. While savings lend a stable foundation, investments decide the size of your corpus, so keep reviewing the performance of your investments to ensure you are on course to amass the corpus you need.

Whether you do it with a spreadsheet, an app or a simple diary, keep monitoring your finances periodically to make sure you are on the right track. This will instil vital financial discipline and help you make the most of your money.

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The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC) on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance* (or such earlier date as referenced herein) and is subject to change without notice. The AMC has no obligation to update any or all of such information; nor does the AMC make any express or implied warranties or representations as to its completeness or accuracy. There can be no assurance that any forecast made herein will be actually realized. These materials do not take into account individual investor's objectives, needs or circumstances or the suitability of any securities, financial instruments or investment strategies described herein for particular investor. Hence, each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard. The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein. The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.