JOIN USAll of us may not be able to earn throughout our life, but we definitely need money throughout to meet our living expenses. It is important to plan for finances, so that life is smooth for us and our loved ones.
You may think that this is easier said than done! But if you are aware of your own financial profile and the planning options available, this is not difficult at all.
Let’s start with, why do you need Life Insurance.
You are probably earning enough to meet your requirements. You may even have some surplus money that you are investing in a fixed deposit, stocks, and property, among others.
Have you considered that most of your financial investments/plans are for short-term duration? Have you considered how around 30-35 years of income generating years will provide enough for 25-30 years of post-retirement life?
Earlier, people would rely on their children to provide for the retirement years, but with nuclear families and rising costs, this is becoming increasingly difficult. Thus, we individually need to start planning early for our post-retirement life.
Have you protected your family against financial uncertainties?
Even the best laid plans can go awry! One must have a contingency plan in place. You must understand that the investments you have made can only give you incremental returns. How will you ensure the current level of your earnings for your family in case of an unfortunate event?
Large outflows
Have you planned for large outflows, such as children’s education, marriage, buying a house etc.? Do you save enough and systematically, so that over 10-15 years you can build a corpus to meet these requirements?
Life insurance plans are multi-benefit plans that prepare you for your contingencies.
Do you understand your own financial profile? In order to make a financial plan, it is important to identify your own financial profile and peculiarities.
Do you have an uneven flow of income, or do you have a steady predictable income stream? Do you save systematically, or are you running out of money by the end of the month?
Manage your funds
Do you have a high understanding of the equity and debt markets and would you take time to actively manage your funds, or do you not have the time or inclination to research, understand and make decisions on a frequent basis? How do you identify your needs?
These simple questions can help you identify your financial needs.
How many dependents do you have?What are the immediate big expenses that you foresee? Buying a house? Funding your child’s education? Planning for your child’s marriage? Looking after aged parents medical expenses? At what age do you expect to retire? Do you have funds set aside to take care of expenses after your retirement?
How much do you expect to require per month for expenses to maintain the lifestyle that you are habituated to? Do you have a contingency fund for unforeseen medical expenses?
Think over these and identify your unique profile and needs.
(The author is MD and CEO of IndiaFirst Life Insurance)