6 Traits of Financially Healthy People

Financial Planning
Written By Nobias

Being financially healthy is about more than just having money; it’s about having control over your finances and making smart financial decisions. Financially healthy people tend to share these six traits:

1. Living Within Their Means

Managing competing financial demands can be challenging, but financially healthy individuals know how to differentiate between Needs, Wants, and Savings or Debt Reduction:

  • Needs: Essential expenses like rent/mortgage, food, utilities, transport, and minimum debt payments.

  • Wants: Non-essential spending such as dining out, new clothes, entertainment, and vacations.

  • Savings/Debt Reduction: Includes savings for emergencies, short-term and long-term goals, and extra payments on debt.

Tracking daily spending and categorizing expenses can help you assess whether you are living within your means. If your monthly expenses are lower than your income, you are on the right track.

Fun Fact: 68% of Indian Millennials are prepared to cut back on expenses to save for their long-term future.

2. Building Emergency Savings

Financially healthy people prepare for unexpected expenses by setting aside an emergency fund. Experts recommend saving enough to cover 3 to 6 months of essential expenses.

Tips to Build an Emergency Fund:

  • Set savings goals and track progress.

  • Discuss savings goals with loved ones for accountability.

  • Keep emergency funds separate from daily spending accounts.

  • Automate savings to transfer money to a savings account each month.

  • Start small—saving any amount is valuable over time.

3. Protecting What Matters

Insurance provides a safety net against financial risks. Consider insuring:

  • Health

  • Life

  • Property (home, car, valuable possessions)

When choosing insurance, compare policies based on:

  • Premium costs

  • Terms and conditions

  • Claim payment ratios

  • Fees or penalties for missed payments

A healthy approach includes applying for coverage against major risks while using an emergency fund for smaller, unexpected costs.

4. Avoiding Excessive Borrowing

Excessive borrowing can lead to financial stress. Warning signs include:

  • Using loans for daily expenses instead of emergencies.

  • Repeated borrowing to cover regular bills.

  • Only making minimum payments on credit cards.

  • Using cash advances to cover expenses.

If debt feels overwhelming, seeking financial guidance can help regain control.

5. Saving for the Future

Research shows that 75% of people globally do not regularly save for retirement. In India, only 33% of people save consistently for retirement, and nearly 68% of working-age individuals expect their children to support them later in life.

Planning for the future ensures financial independence. Steps include:

  • Setting long-term financial goals.

  • Investing in retirement plans.

  • Diversifying investments for wealth growth.

6. Spotting Scams and Avoiding Fraud

Financial fraud is on the rise, but financially healthy individuals take steps to protect themselves:

  • Never share passwords, PINs, or personal financial details.

  • Use strong passwords and update them regularly.

  • Verify emails claiming to be from banks before clicking links.

  • Install and update security software to protect online transactions.

By cultivating these six traits, anyone can improve their financial health and build a secure future. Start today by assessing your habits and making small, positive changes!


References:
1. NSDL, The Financial Kaleidescope 2017
2. NISM: Life Insurance: Securing Your Family's Financial Future


Nobias
Next

Savings Strategies for Life: Building a Secure Financial Future