April 1 is celebrated for a variety of reasons. There are those looking at playing a prank on others on April Fool’s Day. Then there are some who are looking at setting their financial house in order with some serious commitments.
A new financial year sees many an individual exhibiting Salman Khan-like zeal in outlining commitments to self and family.
Virat, a 30-year old, working in a private sector financial services company, is one of them.
- Virat is married, with a kid, another one could soon be on the way
- His wife is a homemaker
- He has recently purchased a house on loan
For a dedicated individual like Virat, here are some must-commit resolutions:
- Commitment to family
Being the sole breadwinner, Virat understands his standing in the family with regards to financial obligations. An unfortunate incident, be it an accident or a medical condition, an #IfsOfLife as we call it, can leave the family with a serious financial problem. Virat resolves to take affirmative steps to ensure that his family is not left in the lurch in his absence. He plans to buy life insurance…the kind that is affordable and convenient to purchase. In other words, he is looking at buying an Online Term Insurance Plan.
- Commitment to children
His family already has a little one with another one on the way; so Virat knows his hands will be full raising his children, particularly money-wise. Virat, an MBA himself, has a fair idea of how much higher education can stress a family’s finances. He appreciates that cost of an MBA can be in the region of Rs 10 lakhs at today’s cost. Assuming 5% inflation, the MBA degree will cost over Rs 26.5 lakhs twenty years from now. Virat is certain that with a little planning he can save enough for his children’s education. He resolves to save money in a child insurance plan. Child insurance plans are tailor-made to meet the future financial needs of your children. You could invest in them to build a corpus for:
- child's education
- a house that you wish to gift your child,
- Commitment to self and wife
Virat understands that one of the risks he and his wife face, is that they may outlive their savings. In other words, their money may well run out, leaving them with a very insecure future in their golden years. Post-retirement not only features regular living expenses, one can also see inflated healthcare expenses. Without adequate money in the retirement kitty, the couple could be in a very precarious position at a time when there is little they can do to better their situation. To counter this uncertainty, Virat resolves to buy a retirement plan that can assure him and his wife of a more secure post-retirement future.
- Commitment to a more secure future
Virat is doing well in his workplace and looks set to grow steadily through the ranks. But he understands that nothing is for certain on the corporate stage. He may face problems in his job or in the industry and may be forced to join elsewhere at a lower pay or he may even have to wait a while at home for the right job.
Then there are health disasters and accidents that could set him back financially.
To meet these uncertainties i.e. #IfsOfLife head on, Virat resolves to save towards an emergency fund of at least six months’ regular household expenses. The emergency fund will provide for financial/health disasters, job loss or any event that takes a heavy toll on the family’s finances.
For many individuals, the new financial year translates into a renewed focus on tax-planning. But for the commitment-driven ones, it’s an opportunity to list down the key financial goals of the family and find the right investment/insurance product to achieve the goals. And if they collect a tax benefit along the way, then that’s the icing on the cake.