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How to stay financially healthy

A tourist enjoying sunset at a resort; image used for HSBC India How to stay financial healthy article

Forming healthy financial habits takes time and effort.

It can take weeks, if not months, for a new habit to form and for a behaviour to become automatic.

Here's a reminder of the main points:

  1. Live within your means

    Keep track of your monthly income and expenses and find ways to free up funds to cover your outgoings if you need to. Set a budget for how you will spend the money you earn.

  2. Spend wisely

    Get into the habit of dividing up your expenses into needs, wants and savings or debts. If it's appropriate, aim to spend 50% of your income after tax on needs, 30% on wants and 20% on savings and debts each month.

  3. Free up funds

    If you're not saving as much as you'd like, or find it hard to cover your costs each month, look for ways to reduce your outgoings. Also, think about how you might increase your household income.

  4. Build emergency savings

    Aim to build up enough savings to cover at least 3 months of essential outgoings, in case of emergency.

  5. Avoid excessive borrowing and manage your existing debt

    Aim to borrow only what you can reasonably afford to pay back. Take steps to manage debt that you have already, for example, cut back to free up capital, approaching your lender for support, or consolidating debts.

  6. Save for the future

    Start saving for your retirement as early as you can. The younger you start, the bigger your retirement fund. Remember that compound interest quickly multiplies, earning you additional interest on what you've previously earned.

  7. Protect what matters

    If you can, take an insurance to protect you from risk that you would not be able to cover yourself, like losing your household's main income through illness or injury.

  8. Beware of scams and fraud

    Online financial fraud is on the rise, so take steps to avoid becoming a victim of cybercrime. Remember the saying if something sounds too good to be true then it probably is.

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Disclaimer

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