Tips on how to secure your future financially within 2021
How to safe your future financially
How to secure your future financially depends on your current age and the retirement age. What will function as the main expenses once stop working?
Now imagine you have no dependents, home/car/other loans are paid off. Generally no long-term liabilities. Therefore here is the list of major expenditure heads:
• Daily/Monthly running expenses just for food, transportation, utilities, conversation, TV/cable, maidservants, etc .
• Occasional expenses for once a month or for movie theater, eating out, etc .
• Your annual expenses designed for medical insurance , car insurance, property taxes, housing society AMC, etc .
• Vacations and vacations as and when
Purchase an adequate amount of Insurance coverage to protect your future
Regardless of the age group, everybody covers the following:
- Purchase pure term insurance for every earning associate – typically husband or wife. You should Stat with the sum guaranteed value of rupees 1 crore for the term insurance plus increase as the age raises. In general sum, the assured value should be between fifteen to twenty times more than your current CTC. Stop the term insurance as soon as you retire or each making member retires.
- Set up comprehensive medical insurance that covers all members of your family. also, check if parents are covered or not. Your medical insurance should not have any sub-limits such as ICU cap, room rent cap, Ambulance expense limit, etc . Each member should cover at least a sum of ₹ 5 lakhs at the current cost. This must increase every 5 years.
- Besides comprehensive health insurance , you must also have a loved ones floater top insurance associated with twice the value of comprehensive insurance plan with a deductible. It must cover all family members. For instance:
- you should make sure each family member for ₹ 5 lakhs each
- also, add on top-up insurance should be ₹ 10 lakhs
- along with ₹ 5 lakhs since deductible.
- In any situation, if you run into a significant medical emergency, your first line of cover is the employer’s insurance policy. If that gets fatigued, use personal insurance. In the event that also gets exhausted in any case then use the family members floater top-up.
- Family floater top-plans are very cheap.
Build Emergency Funds to secure your future
Right after planning for the insurance your second phase should plan for emergency funds:
- Emergency Job Loss Account: This finance protects you from sudden job loss and retains you running while you hunt for a new job. The amount must be 6 months of gross (or net) take-home pay. While you get older, plan for a longer/larger fund because it will be difficult to find a job then cap it to max one year of pay.
- Parent’s medical emergency: You also consider a parent’s medical emergency if mothers and fathers do not have any medical insurance, have no own funds, etc . The total amount should be at least ₹ 3 lakhs per living mother or father at current costs.
The above funds must be kept in a Liquid MF (better than rely FD) and must not be handled.
Manage your Economic Goals
Next arrives the individual financial goals. Each goal must be independently planned. Here is a list that includes few financial goals. It will help you to definitely determine your set of goals.
- Buying a home for self-occupation or being an investment
- Buying the dream car
- education of children (Bachelors plus Masters degree)
- Children marriage
- Vacations abroad (optional)
- Retirement (the final and most important goal)
The value of every goal will depend on your current age group, the goal age, and the inflation rate of the nation. Let’s consider that the current inflation rate is around 6% and it is constant. Then these types of few things will help you to take care of the goals (1) plus (2):
- Renting can be cheaper than buying. But the problem is lease will rise and it is the pure expense. There is a wide range of uncertainty because the landlord might not renew the lease. Because of these uncertainties, you cannot plan your furniture as per your wish, appliances, and decorations to your liking. And finally, at the end of each year, you are not paying off to build your asset.
- We suggest you choose a resale property, especially the distress sale. These kinds of qualities are easily available at a low price and for the same budget one can either plan for property and interiors or buy a larger size or get nearer to the center of the city.
- You may have a plan for a new car but you should know that car is really a heavily depreciating asset. Once you drive the car out of the showroom, it will be depreciated by 5% of its on-road price. My advice is don’t buy a new vehicle instead go for an used one.
- You follow the following exercise to secure your future:
- Every day note down the expense. However, smallest expense such as tea , cigarette, snacks , etc . must be noted straight down as Debits .
- Every expense/debt should be classified as necessary, nice to have (once within a while), totally unnecessary, and extravagant.
- Make a sheet with a pivot desk on expenses (essential, OKAY to have once in a while, extravagant).
- Reduce the extravagant as well as “OK type” expenses.
- Try not to eat outside too often
- Attempt to reduce the number of visits to the multiplex and cinema
- If possible try to find less expensive subscriptions to TV/DTH, mobile/internet, etc .
- Attempt to use carpool; it is great for the environment also
- You need to think and find out where you can cut down
- Follow this principle strictly Internet Monthly Income – EMIs – Compulsory Savings straight into Investments = Money left for Expenses. Most people do not follow this particular rule rather they just do the opposite. After performing all the expenses, if there is money left then they do savings.
Goal Planning and Attaining
Now plan and assigned inflation-adjusted values to the goals. For instance, at the age is 30, A family with 2 parents, a partner, and one child having regular expenses is ₹ thirty-five, 000 today (rent and EMIs or insurance are not consider), then 28 many years later, at a 6% pumpiing rate, the figure gets to approximately ₹ 1, 79, 000 pm.
But at the age of sixty, your family member may be just two (you and your spouse). So this figure may reduce by some amount – let’s say ₹ 1, fifty, 000 pm or ₹ 18, 00, 000 per year. This is in the 58th age year. I assumed the fact that life expectancy is 80 years then it will continue to grow along with inflation.
So for this single goal, depending upon age you will need to invest as follows (assuming 10% return on investment ):
The above corpus can last till the age of 80.
Start as Early as Possible
It is not necessary to start your all goals at the same time. You can set your own priorities to secure your future. For instance, For somebody buying their own home is essential. For others, retirement planning is essential for a secure future.
The important is to begin planning as early as possible in every area of your life. Learn the benefits of compounding . For example , Just ₹ 10, 000 SIP per month invested for two decades in a great MF that returns 10% on an yearly YoY basis can create a corpus of ₹ 76. 57 lakhs (your own side of the bargain is ₹ 24, 00, 000).
Lots of contribution towards each goal depends upon the current net take-home salary (all earning members). Hence setting priorities is important.
I hope this helps all. I may have missed out on something. In that case, I like comments and suggestions from you.