Five Equations of Financial Wellbeing

Posted: February 19, 2012 in Financial Literacy, Personal Finance

New years are befitting of great beginnings. As you promise to exorcise personal demons and execute a new world order, have you looked at how much you’re really worth? Ultimately, changes command financial viability – so be armed with the five financial equations below.

I. Savings » A Sustainable Bank Accounts

Proper partition of income and allowances is key to a bank account that actually grows, not merely dwindle. Here’s a simple equation:

Income – Savings = Expenditure

Or if you want to be snide about it:

Reality – Delusion x Sacrifices = Money for a Rainy day

Cutting corners is a good step towards liquidity. Substitute brand name products (clothes, food, even shoes) for cheaper alternatives. Living within one’s means should not equate to a vow of poverty. It’s more like allocating your resources properly, instead of wasting too much on unnecessary stuff.

II. Investments » Make Money Work For You

A crusade to the stock market may be cheaper nowadays, but it is not for the faint of heart. To know your investment appetite, use this formula:

Disposable Cash / Risks = Investment Appetite (Low, Average, High)

Taking in your Investment Appetite, identify your kind of mutual fund:

Investment Appetite + Purpose = Your Mutual Fund

Mutual funds are perfect for financially naïve investors, which accounts for everyone but those from the financial service sector. You not only let your money work for you, but you get the wisdom of an investment manager for a fraction of the cost.

III. Insurance » Living Protection

Long has it been established that insurance is for the living, not for the dead. Before your own financial grave starts getting deeper, keep this in mind:

Beneficiaries x Dreams = Insurance Policy

Of course, if you’re feeling a wee bit selfish:

Personal Worth / Beneficiaries = Insurance Policy

Insurance policies have already adapted to the changing times, where consumers need not wait a lifetime to enjoy its benefits. Whether you want long-term or short-term, traditional or laced with investments, you can easily find the perfect fit for your dreams.

IV. Health Plan » Best Medicine

An apple a day may keep the doctor away, and a reliable medical plan can stave off monetary destitution. Prove that your health is wealth by:

Lifestyle x History (Dependents) = Health Plan

But if a scare tactic is what drives your determination:

Vices + Virtues / Responsibilities = Health Plan

Hospital bills can easily eat up your rainy day fund. Diagnostic exams can also put a big dent to your budget. And we’re still not talking about emergency procedures due to accidents. Save your loved ones from these woes by availing of a health plan that suits your lifestyle.

V. Retirement » All of the Above

Your nest egg is that comfortable place in the not-so-far future, where the knees are weak but the pockets are still deep. No matter what equation you choose to adapt, you can finally achieve:

Savings + Investment + Insurance / Health Plan = Security

Oh for goodness sake’s, here’s a more truthful formulation:

Life – Savings – Investment – Insurance – Health Plan = Insecure You



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