Independence Day is a reminder of our determination towards calls to actions like “India will awaken to make its tryst with destiny”, “Gareebi Hatao”, Dream of “India Strong, Independent, Self-reliant” “Vision of India which is free of hunger & fear”, “Atmanirbhar Bharat” and numerous more. While I am in awe of these visionaries and their passion for nation-developing, it tends to make me reflect on my contribution as a parent and a leader of the family unit and what can I do for my nation.
Fundamentals & Financial Plan
Every journey begins with a vision or a dream or from time to time a image of the finish state in thoughts. In our present context, it is to give wings to our children to fly out of the nest confidently in their quest to fulfil their dreams. Apart from offering the fundamentals of “Roti, Kapda & Makaan” – the essentials to make a living, it is significant to make a monetary strategy. A beginning point for the similar is to have a extensive worksheet that captures your assets/liabilities/revenue/costs.
Assets can include things like Bank accounts with numbers & nominees (Savings Bank / Fixed Deposit/Locker), Insurance policies with renewal/ maturity dates, nominees and sum assured, Mutual funds with at least quarterly holding statements, Retirement rewards particulars like Provident Fund, National Pension Scheme, Voluntary Provident Fund & Public Provident Fund, Shareholding statements each and every half year, House/ industrial home, Vehicles & Jewels/Gold
Liabilities can include things like Home Loans with EMI/ Interest and Principal payable this year, credit card outstanding, & all other loans EMIs.
A spending budget sheet for the year with month-on-month particulars like:
- Savings (Emergency fund, PF, Investments, SIP, and so on)
- Income (Salary, Rental revenue, Any other recurring revenue)
- Expenses (all recurring – Food, House rent, Clothes, Education, Transportation, Entertainment, Health & Vacation)
- It is significant to visualise dreams and make a separate strategy for every. Please solicit the services of an professional – in this case, a monetary planner who is nicely-versed with the above if you are not in a position to do justice.
Resilience to shocks
All roads have bumps and every person faces a sin curve of ups & downs in their lives. If your shock absorbers are very good, then you will be resilient and in a position to handle short-term challenges like illness, hospitalisation, accidents, and unforeseen loss of life. A clever way of carrying out this is to transfer such unforeseen dangers. A very good well being, motor accident insurance coverage for the family & automobile guarantees that the life savings meant to pursue dreams are not re-channelled for accidents or well being emergencies. A very good term life insurance coverage policy serves to replace the revenue of the bread earner inadequate measure and retain the freedom of the kid to fulfil his/her dreams.
Exterminate debt
While we embrace debt as a necessity to invest in immovable assets like a residence and movable assets and services, we should really also embrace the debt repayment mechanism with equal fervour and work towards the early settlement of the debt. These can be carried out in basic actions like:
- Pay your credit card bill on or prior to the due date to avail rewards of the credit cycle and however not any charges
- Set your EMI to hit your bank account on the 1st of the month if you get your salary or revenue on the last day of the earlier month. In parallel, discover decreasing the tenure of your loan with modest pre-payments of lengthy-term loans by employing windfall gains
- Protect your lengthy-term debt with an insurance coverage cover that reduces along with the principal outstanding
Education
Receiving very good education empowers the kid to ascertain ideal from incorrect. Formal education via an institution should really be supplemented with the education of values that the kid can only get at home in his/her formative years. I would advocate monetary education at an early age in addition to the above. This can be carried out by:
- Opening a bank account or gifting a piggy bank to encourage the ethos of saving at an early age
- Teaching a teen to produce and handle a spending budget for an activity like a vacation. Apart from feeling independent like an adult which is empowering, it also assists make duty
Discipline to Save prior to spending
We do not need to have to be the Oracle of Omaha to have an understanding of the rewards of discipline when it comes to savings and investments. The basic formula of “Income – Savings = Expenses” can go a lengthy way in developing lengthy term savings.
- Your SIP (Systematic Investment Plan) should really hit your bank account quickly following your EMI
- You may possibly want to discover obtaining 2 bank accounts – one for managing your savings and one for costs
Oh, A contingency or an emergency
Large organisations produce contingency reserves to overcome unforeseen challenges. Many have a Business continuity strategy to overcome emergencies and really serious incidents. You could do the similar for your household and place aside 3-6 months of revenue into a liquid investment. It may possibly aid to park it.
Measure & Monitor strategy annually
After carrying out all the above, it is significant to assess your strategy periodically (at least quarterly) and critique it at least when a year to discover new dreams or to retain tabs on new avenues of revenue/costs.
by, Sunder Natarajan, Chief Compliance & Risk Officer, IndiaVery first Life Insurance Company