Financial health check is a task that must be performed by every individual on a more regular basis if one truly desires to attain financial independence. Today in this piece, I will be focusing on tips for healthy finance that will not only help you be in good short term financial status but will also enhance your capability to preserve and grow your business or wealth in the longer term.
If you ask vast majority of people striving for financial freedom for their financial health check result, you will see them aimlessly moping at you without a clue of what you are talking about.
Well, if you are amongst those in this category, be rest assured that all that will change by the time you finish reading this write up as I will relate financial vitals to some medical terms used for human vitals checkups.
Financial checkup Vitals likened to human checkup vitals
In this section of this article on financial health check, I will attempt to liken some of human medical vital to our financial vitals and then briefly talk on the signs to look out for in your quest to attaining a healthy financial status.
- Blood pressure is likened to your cash inflow. Cash inflow is the life of every venture. Remove cash inflow and watch life snuffed out of what would otherwise be a thriving and profitable venture. You will agree with me that it is dangerous practice not to regularly check your blood pressure especially when you are above certain age. How then do we think it is right not to keep a close tab on our cash flows? Do not forget to learn the difference between relevant cash flows and irrelevant cash flows.
Do you know that profitability is nothing without liquidity? Am not sure so much effort will be put into working capital management if liquidity is not very important to the survival and subsequent thriving of firms.
A regular check of your liquidity ratios is a must for every firm and individuals that really care about their financial health. My earlier post on importance of ratio analysis will provide more information on how to calculate some of the important accounting and business ratios.
Look out for any unexplained unnecessary strain on your cash inflow. Note that temporary cash shortage should not be mistaken for a sign of financial problem.
- Pulse rate is likened to our self-control over impulsive spending. We naturally cannot dictate the pace at which our pulse beats, attempting to do so would be suicidal. Humans are naturally fitted with self-control mechanism that is sufficient to help us overcome impulsive spending. However, we start having financial problems the moment we try to alter the natural flow of events in our bid to meet up with ‘our perceived’ societal value.
How on earth will someone all in the name of trying to live up to what they think the society thinks of them bury themselves into huge debt that may eventually cause bankruptcy?
- Sugar level is likened to the amount of toxic assets that we acquire all in the name of building wealth. One of the mail reasons why people become diabetic is when they build up high blood sugar than their body can regulate. Same is applicable to our financial health. Things start becoming wonky the moment our financial muscles struggle to keep up with the number ‘sweeties’ we gather.
- Eye sight likened to your investment acumen. An individual with bad eye sight cannot see clearly, so it is in financial matters. Having the ability to decipher good investment from bad, fraudulent Ponzi schemes or scam makes a whole lot of difference as far as financial health check is concerned. I always tell people that it is better to be a hybrid accountant who is a blend of ‘street wise accountant’ and ‘professional accountant’.
Having the right mix of street smartness or what some people call business acumen is a foundational ingredient to becoming financial healthy. The good news is that business acumen skill is not expensive to acquire. All that you need is to have an open mind that is willing to learn new things as they crop up.
- Weight measurement is likened to debt burden. Our weight is a function of BMI (Body Mass Index) where things quickly become awkward when one of the components of measuring weight gets disproportionate share of the function – our height held constant. In the financial health check realm, our income potential is fairly held constant thereby making it overwhelmed with huge debt. Debt financing is good but should not be over used if we really care about our money wellbeing.
- Body temperature is likened to your financial worries and pressure. An individual with high body temperature is certainly not feeling well. The high body temperature could be caused by anything but the most common cause of high body temperature is illness. Same can be said about financial worries and pressures. Sick financial status can cause pressure and unnecessary worrying. Cure the financial sickness and see the symptom naturally go away.
- Respiration rate (breathing rate) is likened to our cash generating activities. Our body definitely needs frequent fresh oxygen to survive. We struggle for our lives the moment our respiratory system starts malfunctioning.
Same goes for our financial wellness, we need regular injection of finance into our finance ecosystem. These regular finance injections can come from varying medium. The most common ones are; (a) Salaries for workers, (2) Sales for businesses, (3) Dividends and Interests for investors, (4) Royalties for intellectual property owners, (5) Rents from realtors, etc.
Just like you take your medical health seriously for maximum wellbeing, show your financial health the kind of attention and love it deserves for an improved financial forward momentum. You can use the contact section of this website to send us message to discuss how we can help with your financial health checkup both as an individual and as an organization for the right kind of healthy finance that you deserve.