Financial Planning
Most households in Sri Lanka have lived through at least one recent period when money did not behave as expected. Prices moved sharply. Interest rates moved. Plans that had looked safe stopped looking safe.
That experience is a good reason to check your own position rather than assume it. A financial health check is a simple review of where your money stands today. It will not solve every problem. It will show you what needs attention before you set goals or build a budget.
This check asks four things: what you own, what you owe, what comes in and what goes out. Everything else follows from those four lists.
Use recent bank statements, card statements, loan and leasing schedules, and payment records. Estimates are fine at first. It is better to finish the exercise roughly than to abandon it while searching for an exact figure.
Include current and savings account balances, fixed deposits, your EPF and ETF balances, Treasury bills and bonds, unit trusts, listed shares, land, your house, a vehicle, business assets, gold and jewellery, foreign currency account balances, and money you have lent to other people that you genuinely expect to be repaid.
Use a realistic value, not the price you hope to receive. A block of land is worth what someone will actually pay for it now.
Three points matter here.
First, know which retirement arrangement actually applies to you, because it is not the same for everyone.
That last group is large in Sri Lanka. If it includes you, then your own savings are not merely a supplement to a retirement fund. They are the whole of it, and that changes how much of your income needs to be set aside.
Second, keep retirement money separate from money you can use this month. EPF and ETF balances belong to you, but you generally cannot draw on them until retirement or another qualifying event. They are not emergency savings. The returns credited to these funds also change from year to year, and superannuation funds took part in the government's domestic debt restructuring in 2023, which affected the returns expected in later years. Your balance is real, but it is neither fixed in value nor available on demand.
Third, do not count pledged gold as though it were free. If your jewellery is with a pawnbroker, bank or finance company, it belongs on both lists: the gold as something you own, and the advance as something you owe.
Include housing loans, personal loans, leasing and hire-purchase balances, credit card balances, pawning and other gold-backed advances, education loans, overdrafts, microfinance loans, money owed to moneylenders, and money borrowed from family or friends.
Write down the outstanding balance and the monthly instalment separately. They tell you different things. The balance tells you the size of the problem. The instalment tells you the pressure on this month's income.
Then add the debts that are not yours yet. If you have signed as a guarantor for someone else's loan, you have taken on a real obligation, and this is easy to forget because no money ever reached you. Under Sri Lankan law a guarantor's liability is not a distant fallback. It stands alongside the borrower's, and a lender may pursue the guarantor directly. Signing for a relative, a friend or a colleague is common here and is often treated as a favour rather than a financial decision. List every guarantee you have given, note what would happen if that person stopped paying, and treat it as a risk you carry.
Include salary, business or freelance earnings, rent received, interest, agricultural income, side income, and regular money sent by family working abroad.
Use the amount that actually reaches you, after tax and after EPF deductions. Many people plan against their gross salary and then wonder why the numbers never work. If you are employed and unsure what your deductions are, your payslip will show them.
If your income is irregular, which is true for a great many people here, do not use a good month. Take the last six or twelve months, add them together and divide. Then plan against that average, or slightly below it. Trading, farming, fishing, freelance and commission income all move with seasons, weather and demand, and a budget built on your best month will fail in your worst one.
Include food, electricity and water, cooking gas, fuel and transport, rent, school fees and private tuition, medical costs, mobile and data, support sent to parents or relatives, insurance premiums, loan and lease instalments, seettu contributions, and religious or social commitments such as weddings, funerals and almsgivings.
Small daily spending belongs here too. So do costs that arrive once or twice a year rather than monthly. Divide those by twelve so they appear in your monthly picture instead of arriving as a surprise.
What you own, minus what you owe, is your net worth.
A negative number does not automatically mean you are failing. A young person with an education loan is in a different position from someone approaching retirement with the same figure. What matters is knowing why the number is what it is, and which way it is moving.
Record it now and check it again in six or twelve months.
When you compare, remember that money loses value over time. Prices rose very steeply during the recent crisis, and inflation picked up again through 2026. If your savings balance is the same as it was a year ago, it does not buy the same amount today. This is the most useful thing to understand about holding cash: a deposit paying less than the rate at which prices are rising is quietly shrinking, even though the balance never falls. Compare the return you earn against how fast prices are rising, not against zero.
Subtract monthly spending from monthly take-home income.
If the result is regularly negative, or if you are using new borrowing to pay for normal living costs, treat that as a warning sign rather than a temporary inconvenience. Borrowing to cover routine expenses is the point at which a difficult month becomes a pattern.
If the result is positive, decide deliberately what happens to the surplus. Money left in a current account tends to be spent. A common approach is to move a set amount into savings on the day you are paid, rather than saving whatever survives to month end.
A widely used guide is to build an emergency fund of about three to six months of living expenses. Anyone whose income is irregular, such as a business owner, farmer or freelancer, should aim for the higher end of that range.
That guidance matters more in Sri Lanka than in many countries, for a simple reason: there is no unemployment insurance here. If your income stops, no payment automatically replaces it. State welfare support is means-tested and directed at low-income households, and it is not a substitute for savings for most working families. Your emergency fund is your safety net.
Start with how much of your income is already committed to debt:
Monthly debt repayments, divided by monthly take-home income.
There is no single percentage that suits every household. The honest test is whether what remains still covers essentials, savings and unexpected costs. If it does not, the ratio is too high for you, whatever it might be for someone else.
Then check three more things.
Insurance. Ask whether you are covered for the risks that would genuinely damage you: serious illness, loss of a vehicle, damage to your home, and the death of anyone whose income the household depends on. State hospitals provide care without charge, which changes this calculation compared with many other countries. It does not remove the risk. Lost income during a long illness, and the cost of private treatment where people choose it, still fall on the household.
Dependants. If other people rely on your income, a shock to you is a shock to them. That raises the size of the cushion you need.
Access. Emergency money must be reachable within days. A fixed deposit locked for a year, or a plot of land, will not help you in the week you need it.
Some borrowing in Sri Lanka carries risks that are easy to underestimate.
Pawning and gold loans. These are quick, widely available and do not depend on your credit record, which is exactly why they are so common. The risk is straightforward: if you do not repay, the jewellery is sold. Households routinely lose gold they had every intention of recovering. Rules on how much can be advanced against gold have also been tightened, so do not assume you can borrow the same proportion of its value as before, or that you can roll an advance over indefinitely.
Seettu. Informal rotating savings work only as long as everyone keeps paying and the organiser is trustworthy. There is no regulator to appeal to and little to recover if the group collapses. Count your contributions as a real monthly commitment, and be honest about how much you would lose if it failed.
Microfinance and moneylenders. Small, fast loans can carry very high effective rates, and borrowing again to repay an existing loan is how households become trapped. If you are taking new debt to service old debt, that is the finding of your health check, and it needs attention before anything else on this page.
Credit cards and leasing. Both are ordinary tools used carelessly. On a card, paying the minimum keeps the account in order while the balance barely moves. On a lease, the vehicle can be repossessed, and you may still owe money after it is sold.
If you borrow at all, review your own credit record. The Credit Information Bureau of Sri Lanka lets individuals request their own report, showing the credit facilities recorded against them and their repayment history. People are sometimes surprised by what appears, including facilities they had forgotten, old accounts never properly closed, and loans they guaranteed for someone else.
It is worth correcting a common misunderstanding here. The Bureau is not a blacklist and it does not decide who may borrow. It records credit information, both positive and negative, and lenders make their own decisions using it. A record of consistent, on-time repayment works in your favour. If you find an entry you believe is wrong, raise it with the lender that reported it.
Whether an institution is licensed matters, and in Sri Lanka this is not a theoretical concern. Licensed finance companies have failed, and their depositors have had to claim compensation through a formal process that takes years.
Three practical rules follow.
Only banks and finance companies licensed by the Central Bank of Sri Lanka may legally accept deposits from the public. Schemes promising unusually high returns, run by businesses with no licence, appear regularly, and the Central Bank issues public warnings about them.
Deposits at licensed institutions are protected by the national deposit insurance scheme, but only up to a set limit, calculated for each depositor at each institution. Anything above that limit is not protected. Check the current limit on the Central Bank's website, because it has been raised over time and may change again.
The highest advertised rate is not automatically the best offer. A slightly higher return is poor compensation for a materially weaker institution. Consider spreading larger savings across more than one licensed institution rather than concentrating them.
Many Sri Lankan households rely on a family member working overseas, and skilled workers are leaving in large numbers. If that describes your household, add two questions to your check.
Ask what happens if the money stops. A single overseas income is a concentration risk in the same way that a single employer is. Contracts end, jobs change and health fails. A household living entirely on remittances, with no local savings, is more exposed than its monthly cash flow suggests.
Ask also whether the arrangement is building anything. Money sent home for daily costs supports the household but does not improve its position. If none of it is going into savings, debt repayment or an asset, the household's net worth may not be improving at all despite years of work abroad.
If you hold or receive foreign currency, remember that exchange rates move in both directions, and that rules on foreign currency accounts and overseas investment do change. Use a licensed bank, and check current rules before committing to anything long term.
You are generally moving in a healthier direction when:
Do not measure yourself against another household. Incomes, family responsibilities, housing and health needs differ enormously, and comparisons with people whose circumstances you only partly know are rarely useful.
Most of this exercise is retrieval rather than calculation.
Bank and card statements are available through internet or mobile banking. Loan and lease schedules can be requested from your lender if you no longer have them.
EPF and ETF balances can be checked through the funds' own member services. Access requires registration first, and for EPF this generally involves a form certified by your employer, so allow time rather than expecting an instant answer.
Your credit report can be requested directly from the Credit Information Bureau of Sri Lanka, online or in person, for a modest fee.
Your payslip shows the deductions that separate your gross salary from what actually reaches you.
Seeing everything written down at once can be uncomfortable. That is not a reason to put the page away. It is far better to know.
Work in this order.
If your debts have reached the point where the instalments cannot be met, speak to your lender before you miss payments rather than after. Restructuring is more often available to people who ask early. Taking a new loan to pay an old one is the most expensive way to buy a few weeks.
Repeat this exercise after any major change: marriage, a new child, a job change, starting a business, leaving to work abroad or returning, a serious illness, buying a home or taking on a large loan. Once a year is sensible even when nothing has changed.
Your first goal is not a perfect set of accounts. It is knowing your position clearly enough to make the next decision well.
A health check is a diagnosis, not a plan. What you should read next depends on what your own check revealed.
If nothing alarming came up, the next step is to decide what your money is actually for. Knowing you have a surplus is not the same as knowing what it is building towards. That is the subject of the next article in this series, on setting your financial goals.
If you could not answer the questions, because you genuinely do not know what you spend, start with budgeting rather than goals. You cannot plan around numbers you do not have.
If you are borrowing to cover ordinary living costs, treat that as the urgent finding and go to the material on managing cash flow. Goal-setting can wait a few weeks. This cannot.
If the problem is expensive debt, work through the articles on credit cards and borrowing before adding new savings commitments. Clearing debt that costs more than your savings earn is the better return.
If you have no retirement provision at all, because you are self-employed, run a business or work informally, go to the retirement planning material sooner rather than later. Time is the one advantage that cannot be recovered later.
If your savings are sitting idle while prices rise, the investing material explains the options and the risks that come with them.
None of these has to happen this week. Doing one of them properly is worth more than reading all of them.
This article is general information about personal money management. It is not financial, investment, tax or legal advice, and it does not take account of your personal circumstances. Product terms, interest rates, tax rules and regulatory limits change. Confirm current details with the relevant institution or regulator, and consider taking licensed professional advice before making a significant financial decision.