Is your financial life going well? Are you on the growth path or on the verge of disaster very soon? Your financial life might be in trouble, but maybe there is some more time left before you really take charge of your financial life and really do something about it, else it will crumble and you will be destroyed beyond recovery.

I see lots of people who are not in agreement with the fact that their financial life sucks and they really need to take giant leaps. Somewhere they are comfortable with the whole situation and keep expecting that “somehow” their financial life will improve. So, I am giving you 5 simple indicators, which you can look at and decide if you are headed towards financial disaster or not. The more these indicators are true for your financial life, the bigger is the problem and you need to get really serious about it. If none of these indicators are true for you, then congratulations! , you are mostly in a good situation.

Sign 1 – You cant live for 3 months without a job

The first and the biggest sign of disastrous financial life is that you cant live for a few months if you do not bring money on the table through your job or business. If you have been earning for a few years now, you should at least have a year’s worth of income saved with you, but that’s not the case with many people. Their monthly expenses make sure they are left with nothing at the end of the month. Worse, many people have the negative cash-flow and they are piling up debt each month to survive. These people are mostly dependent on credit cards and keep using them whenever they are in a “crisis” situation. The credit card should be held for benefits + reward points and not because of its a survival tool for you.

Ask yourself, how many months’ salary have you drawn to date in last so many years and how many worths of salary you have saved till now? If you cant survive for more than 3 months (or 4-6 months), you are in big trouble. I asked this same question on my facebook wall a few weeks back and I got responses like “6 months”, “3 months”, “10 yrs” and all kinds of numbers. So better look at your number of months. Do not focus on income alone, because income is not the same as wealth.

Sign 2 – You find it tough to get a higher paying job

Your job/business is the means to bring money to the table each month. Every year or in few years, ideally you should be able to move one ladder up and command a high salary because over the years you will gain experience, add new skills and would be wiser/knowledgeable. However, if you cant move upwards in your professional life, the amount of money you will bring back home will not increase and if that’s the case, you are in trouble.

Ask yourself – Do you see yourself earning 10X of your current salary someday in the future like the next 5-10-15 yrs or not? Are you dead scared of losing your job and never be able to find another? Do you feel that you have reached a level in your professional life, where if you lose your current job, you will find it tough to get the same salary job somewhere else?

If that sounds your case, you are in trouble financially because your biggest asset is your earning capability and not your this year’s pay package only? If it sounds your story, its time to find out how you can increase your skills and take better jobs in coming times, don’t wait for the last moment, it takes few years to hone your skills!.

Sign 3 – You are paying back EMI’s for depreciating assets

There is two kind of debt – good debt and bad debt. Any debt which helps you build assets and grows in value over time is better (I am not saying, go for it, but it’s just better than the bad debt). The bad debt is mainly the debt which is used for CONSUMPTION purpose. You use it and its gone. Examples are personal loans, consumer durable loans, credit card debt or even a car loan(especially the car, which you really don’t need, you can do with a two-wheeler, I am not talking about the car which is really required and can’t live without), then you are paying an outsider on a regular basis, without building any assets for yourself.

It’s like – you are doing the job to help others squeeze money out of you. If you are doing this, better stop it now and see how you can change your direction, you still might have the time to come back on track.

Sign 4 – It has been 5 yrs working, but you have nothing worth called “ASSETS”

You have worked for 5 yrs in the job, now even if you had saved 2 months’ worth of salary each year, you must have had 10 months’ worth of salary with you saved today? Is it there? You must be having some investments in Fixed Deposits, or some gold, or some mutual funds or at-least a small part of your future house down-payments which you are fantasizing about? Is it with you or you have blown up? In my 1st book – “16 personal finance principles every investor should know”, I have explained in the first chapter how the early start of your financial life can break or make the rest of your financial life. Grab it and read it.

Ask yourself, how much you can show off for the last 5 yrs of earning? Just add up all the salary you have drawn in last 5 yrs (let’s say at 4 lacs per year, its 20 lacs in total 5 yrs), how much you currently have in assets? Even if you have saved 3-5 lacs, I would say its fine. But if you are still trying to locate where has all that gone, it’s not a good sign. Remember, how do you start your financial life can be an indicator of your whole financial life. Dont neglect the first 5 yrs of your financial life because it matters a lot.

Sign 5 – You like to spend a lot of social functions!

Most of the people with the worst financial life in India are too social in nature (not vice versa). They keep spending on all the useless social functions either due to social pressure or by choice. Examples like – “How can I not celebrate my child’s 10th Birthday with a grand party, all relatives are looking forward to it” or “I have to gift something worth to this friend/relative because of reasons reasons reasons.

Social functions in India are one the largest wealth-destroying activities, which are not comparable to anything. Dont get me wrong, I know you need to celebrate marriage, birthday, anniversaries and that’s an important part of life, but when it stops being celebration and becomes showoff and obscene display of imaginary status (which others know very well that you are faking), it’s utter nonsense and destroys your financial life. Please stop it

I know the current young generation does not believe too much into showoff and useless social functions, but due to parents’ pressure and mindset, even children have to kneel down at times and cant avoid this social spending’s even if they hate it from the core of their heart. Ask those children, who are struggling to buy a house because they do not have money and their parents blew up 30 lacs on their wedding to invite 800 people (500 of them you meet the first time in your life and they eat maximum ice-cream at food counters). What a joke !. A small bold decision would have made so many lives easy.

It would be a good idea for you to write down how much % of your income to date, have you spent on social functions (which you could have avoided) in the last 5 yrs. If its more than 2 %, I am sorry for you.

I must mention that all the views are my personal based on my ideologies, If you don’t agree with some point, You are equally right and much like anyone else. The points are general in nature and might not be 100% true for every person’s case.

Take some bold step

I can tell you from my experiences – Most people have bad financial life and they do not do anything about it, because it’s not affecting them in the short term.  Every additional bad decision does not hurt their next day, the food will still be on the table, the next movie will still be watched and the small Sunday outing will still happen, but how long if you continue having these 5 signs in your financial life? In our 3rd book – “11 principles to achieve financial freedom” written by Nandish, the coach helps a guy in changing his mindset about his financial life and helping him think like a pro in his financial life, Its an amazing book I would say which no investor should miss.

You need to take some massive action, some really bold step, it has to be 20 times stronger than what you have in mind, you have to really upset few people in your life and have to embrace discomfort for few years. Just a tiny “try” will not help. Imagine you get a deadline from your employer that you can only work for the next 5 yrs and then you will not get any job in the whole world for the next 3 yrs, how will you prepare for this situation? That’s your game plan now!