Financial Fitness Quiz

Taking a financial fitness quiz may be fun as you answer some simple questions whose answers might be amusingly counterintuitive. Nevertheless, this little exercise can instil the investor’s fervour, and who knows, it could change how you think about money! Take this quiz to know whether you are paying the right taxes or spending the right amount of money.

• An emergency fund is a must to maintain your financial fitness if you are going through patchy employment.
• If you are using more than 30-40% of your monthly income on EMIs, you should reconsider your spending pattern.
• Invest wisely in mutual funds to fulfil your ambitions.

1) Do you have an emergency fund?

a) Yes
b) No
c) No idea

Having an emergency fund is important because it can sustain you and your family in times of crisis. In case you face temporary unemployment or want to take a break for a while, your emergency fund will have your back. Typically, you should have 3-6 times your monthly salary in this fund, and you are good to go.

2) How much is your EMI?

a) 10-20%
b) >50%
c) 20-30%

If you have made a big-ticket purchase and are paying your EMI for it, you need to understand certain key points related to financial fitness. Please note that your ideal EMI should not be more than 30-40% of your monthly income. If you are spending about 10%, then you are on the lower end and can consider bigger purchases, keeping your income in mind.

3) Have you paid interest on your credit card bills in the recent past?

a) Yes
b) No
c) Don’t remember paying

If you are paying interest on your credit card, at least a discernible one, you have probably chosen the wrong credit card. A lot of banks provide credit cards at zero annual percentage rate (APR) for a promotional period, meaning you do not need to pay any interest on your spends. Sure, APRs are applicable after the first or second year, but there’s a workaround to it as well. You can always have multiple credit cards and channel funds from one that is charging interest to a zero APR credit card to save money.

4) Do you have a term insurance plan?

a) Yes
b) No
c) What is term insurance?

A term insurance is a policy that you pay premiums to as a preemptive measure against critical eventualities. Most term insurance plans do not provide maturity benefits if you survive the duration. However, premiums paid on term insurance are valid grounds on which you may claim a tax deduction under section 80C of the Income Tax Act.

5) Do you have health insurance?

a) Yes
b) No
c) Not yet

Having health insurance is a good way to ensure that you are not in trouble if you have a medical emergency at home. However, there is more to health insurance than just that. You are eligible for tax deductions of up to Rs. 25,000 each year under section 80D if you have paid premiums for health insurance. If you are 60+ years old, you can claim deductions of up to Rs. 50,000.

6) Are you making investments to fulfil your big dream (house, car, etc.)?

a) Yes
b) No
c) I am making savings

If you have been saving by using your savings bank account as your fund, you need to do more to improve your financial fitness. The inflation rate is not slowing down and the interests offered by banks are doing anything but keeping up with it. Therefore, it would be a good idea to invest in revenue-generating investments like mutual funds that give you good returns. If you are risk-averse, you could try more stable options like the equity-linked savings scheme (ELSS), which offers tax benefits as well. It has additional investments in debt funds to protect you against market volatility.

7) Do you have a retirement fund you are investing in?

a) Yes
b) No
c) What is a retirement fund?

Retirement funds help you gather enough funds to improve your financial fitness and save enough for leading a comfortable retired life. While most companies have provisions for Employees’ Provident Fund (EPF), you could also make use of the National Pension Scheme (NPS), or the Public Provident Fund (PPF). All of these have provisions for tax deduction under the Income Tax Act, and you should take advantage of them.

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 7.75% p.a.