What we fear most? We fear the unpredictable most. Something, which we don’t know – how and when will affect us. Almost all such events affect us in either of the two ways – emotionally and/or financially. At least we can prepare ourselves (read, insure ourselves) in such a way so that our financial stability always remains intact, come what may.
Life is precious, priceless – can never be quantified. But lifestyle can be. So is your liability, financial commitments to family members and so on. If you have enough financial assets (which can easily be liquidated), which can take care of all these, then you don’t need insurance. But if you’ve not, then you should take adequate life insurance cover. Period.
Not all such events lead to loss of life. There are times, when we get hospitalized, operated, treated for long time. And when we get cured finally, we find a big hole in our pocket then. This can and should be avoided. We should take enough health insurance cover, often referred as ‘mediclaim’. Entire family should be covered here. Make sure it is renewed till maximum age. At renewal, after regular interval, you may also consider increasing the cover. Also read terms & conditions and exclusion list very carefully.
The list of unpredictable events seems never ending. Other than medical emergencies, there could be many more events, often unavoidable, which may cause good amount of money to be spent suddenly. Income can also become irregular at times. Even loss of job is also a possibility. To face all these and many more, you should build and keep your emergency fund ready. This could be equivalent to your 3 to 6 months’ of expenses, including EMI, if any.
All play and no work makes you a retired man. Retirement is a certainty. You also know the time beforehand. But you don’t know the expenses beforehand. You also don’t know how long you will live. What return you will earn from your investments post retirement – hardly you can predict. Where there are so much of uncertainties – you need to plan. And you need to plan early. Plan while you are saving money for retirement, and also plan that how you can give yourself a regular paycheck when there is all play and no work.
Once your child completes 10+2, things change a lot. From general stream of education, s/he chooses a particular field of study to pursue further. This involves choosing of an educational institute of excellence, which may be here in India or abroad. All these may involve spending a lot of money also. To prepare such a fund you need to plan beforehand, plan early. Growth and flexibility of investment instruments here are of primary importance.
In financial terms networth stands for ‘Assets – Liability’. Knowing your networth is important. Are you “asset rich, cash poor”? Do you have mostly real estates in your asset portfolio? What is the percentage of financial assets there? Do you have certain assets which are earning less return (post tax, inflation adjusted) than your goal demands? Can you liquidate your assets easily when it is required? Prepayment of your home loan – should you, shouldn’t you? Ask. Get answers. Get empowered.
Managing monthly cashflow – seems to be an easy task by most of us – often turns out to be the toughest area to handle. Some expenses are known beforehand – either timing or amount or both. Some expenses happen non-monthly – you need to keep aside money for such. Some expenses can not be predicted at all – could be impulsive or unavoidable. Also handling several bank accounts, credit cards, ECS instructions – no less task than our Mr. FM. Recognize. Spend time. Stay consistent.
There are other tasks to do also – filing IT returns, replying to IT notices, keeping all financial documents safe and accessible, handling softcopies and emails, maintaining holding patterns, making nominations and beneficiaries etc. Also choosing and keeping in terms with your CA, financial advisor/planner, lawyer, insurance agent, bank RMs etc. Then monitoring and reviewing of your asset portfolio, financial plan in respect to changes in your family budget, as well as changes in tax and financial regulations.