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Financial Health Assessment: goals, importance, advantages and more
The primary objective of financial health assessment is to determine how finances are doing or what measures must be taken to achieve financial goals. A financial health assessment ensures an individual can create good money habits, have a robust financial plan, and a clear investment management plan to reach their financial goals. Another objective of financial health assessment is to identify the opportunities for financial growth and ways to improve the sources of income. By working through the process of financial assessment, individuals can organize their finances according to the available income and target goals. A routine financial health assessment is key to all investors and entrepreneurs as it informs them about their current assets and debts, helping them devise new strategies and investment decisions.
When applying for a loan or making big large purchases, it is important to know the loan eligibility and amount of savings. A financial health assessment determines the creditworthiness by looking at the credit score depending on the individual’s purchasing power or borrowing limit. It also evaluates investor’s current debts and how they have been dealing with them. If they are not up to date with their monthly payments, it ensures that the investor has a new repayment plan to tackle their debt. With this information, individuals can use financial health assessments to check their debts and determine their creditworthiness.
A good budget is the foundation of financial well-being. It is highly beneficial to reserve a portion of personal income as surplus in hibernation mode. Budgeting the surplus can only be achieved through financial health analysis to determine the amount of income allocated in different expenses and possible surplus. The surplus amount identified during financial health assessment can be used to invest or for any unplanned emergencies. A financial health assessment is the most appropriate way to review the current personal budget and identify the surplus income depending on the goals and financial changes.
Retirement planning is an important factor that can be made effective by financial health assessment. The rising cost of living and healthcare cost has made it necessary to plan for retirement or invest in schemes that will make life comfortable after retiring. When a financial health assessment is conducted, financial advisors can identify the right amount to save for retirement according to the client’s income, age, and retirement goals. Therefore, financial health assessment ensures individuals contribute the right amount towards retirement plans and whether they can increase it with time.
Financial health assessment allows individuals to review and redefine financial goals. Losing track of financial goals set at the beginning of the year is a challenge facing many individuals. A financial health check offers the opportunity to review both long-term and short-term goals to determine how effective they are. It also allows individuals to find out what worked and what did not work in order to implement new goals.
Financial health assessment enables individuals to effectively budget for their income or revenue from investments. Investors are usually busy keeping their business running and managing their assets and may hardly recognize how cash is utilized. Through financial health check, individuals can pinpoint areas they spend too much or less and make responsible financial decisions.
Financial health assessment covers four main pillars: Sending, savings, borrowing, and planning. Financial advisors consider these four aspects when conducting a financial health analysis. Individuals should work on improving the health of the above to attain financial stability.
At Arrowroot Family Office, financial advisors provide clients with financial health assessment which helps them analyze their financial situation. The financial advisors also offer the right steps for improvement to help clients achieve financial goals. The process of financial assessment at Arrowroot Family Office involves the following steps.
Through these steps, Arrowroot can help individuals and companies conduct financial health assessment to determine how their finances are doing and what can be done to achieve their financial goals.