Financial Fitness Test: Are You Really Investment-Ready?

Most Indians start SIPs (Systematic Investment Plans) without ever assessing their financial health score.

It often begins the same way — a friend’s success story, a quick Google search, and a few taps on an app. For Delhi-based Ritesh Verma, that was enough to start a Rs 5,000 SIP. But three months later, when an unexpected car repair bill of Rs 45,000 arrived, his only fallback was the very investment he had just begun. He redeemed it at a 7 per cent loss.

This scene plays out in thousands of Indian households every month. The mutual fund industry’s Assets Under Management (AUM) crossed Rs 79 lakh crore in October 2025, yet financial planners are noticing a worrying trend: people are investing before they’re financially ready.

“The biggest challenge we see today is that investors are confusing access with readiness,” explains Sanjiv Bajaj, Joint Chairman and Managing Director at BajajCapital. “Digital platforms have made investing incredibly easy, perhaps too easy. You can start an SIP in five minutes, but building true financial fitness takes time and discipline. Adequate insurance, emergency funds, and debt management aren’t optional steps you skip to get to investing faster; they're what make investing sustainable.”

The Five Pillars of Investment Readiness

1. Emergency Fund: Your Financial Shock Absorber

Before investing a rupee, build an emergency fund covering 6–12 months of essential expenses - rent or EMIs, groceries, utilities, insurance premiums, school fees. Keep this money in savings accounts, liquid funds, or sweep-in FDs, not in equity, not locked away, and accessible within 24 hours.

2. Insurance: The Safety Net Nobody Wants to Buy

Two types of insurance are non-negotiable:

Term life insurance (10 –15 times your annual income if dependents rely on you)

Health insurance (minimum Rs 10 lakh cover for metro families)

A 30-year-old can get a Rs 1-crore term cover for roughly Rs 1,000 a month. Skipping it doesn’t save you money. It transfers catastrophic financial risk to your family.

“Insurance is the most underappreciated component of financial planning in India,” Bajaj adds. “We see investors allocating lakhs to mutual funds but hesitating over a Rs 15,000 annual term premium. Insurance isn’t a cost, it's the protection that allows your investments to actually work for you over time.”

3. High-Interest Debt: The Wealth Destroyer

If you’re carrying credit card debt at 40 per cent interest while investing for 12 per cent returns, you’re losing 28 per cent every year. Any loan above 12–14 per cent interest should be cleared before serious investing begins. Paying off a 36 per cent credit card bill gives you a guaranteed 36 per cent return - no mutual fund can promise that.

4. Income Stability: The Often-Ignored Reality

SIPs thrive on consistency. If your income is irregular or you’re in a probation period, focus first on liquidity and protection. Interrupted SIPs defeat the principle of rupee-cost averaging, the very thing that builds long-term wealth.

5. Clear Goals: The Purpose Behind the Process

Investing without defined goals is like boarding a train without knowing your destination. Retirement in 30 years demands a different plan than a home down payment in five. Write your goals clearly, like what you need, when you need it, and how much you need. A goal isn’t just “retirement.” It’s “retiring at 55 with Rs 5 crore to generate Rs 50,000 monthly income.”

Your Investment Readiness Score

Give yourself points:

• Emergency fund covering 6+ months of expenses – 30 points

• Adequate term and health insurance – 25 points

• No high-interest debt (above 12 per cent) – 25 points

• Stable, consistent income – 10 points

• Clearly-defined financial goals – 10 points

Score 70–100: Investment-ready. Build a diversified portfolio.
Score 50–70: Address gaps while starting small SIPs (Rs 1,000–2,000 monthly).
Score below 50: Pause investments. Focus entirely on building your foundation.

Why This Matters

“We track client behavior over decades, and the pattern is clear,” says Bajaj. “Financially-fit investors with proper insurance, emergency funds, and no high-interest debt stay invested longer and handle volatility better. Their returns aren’t better because they picked better funds. Their returns are better because they could stay invested through full market cycles.” Every financial planner has seen the same stories repeat:

• Someone invests without insurance, then hospitalization wipes out savings.

• Someone invests while carrying credit card debt, watching interest charges erase gains.

• Someone builds a portfolio but must liquidate it after a job loss because there’s no emergency fund.

And yet, there’s the contrarian success story - the investor who first spends 18 months building an emergency fund, buying insurance, and clearing debt. When markets dip, they don’t panic. When crises hit, they don’t redeem. They invest more. That’s how real wealth compounds through patience and preparation, not timing or luck.