How to ensure financial stability and security is a question that concerns a lot of adults. Financial security includes your family’s protection against the health problems, death, or disability of your breadwinner. Financial security should be in all segments of our lives. Besides insurance, which is one of the most crucial things for long-term security, the way we manage our finances is also a time- and effort-consuming part of our lives.
This approach will be more manageable if you follow the following steps that will help you ensure your family’s financial future.
Setting the Foundation for Your Family’s Financial Future
1. Budget your expenses
Of course, the first step is to budget your expenses and plan to spend your money more productively. How you budget your expenses is the most important thing. First, every expense listed on an expense report is potentially important.
What does the budget mean to you? Budgeting typically involves postponing non-urgent expenses until a later date and increasing savings now. There are few cost savings.
How long you can postpone non-urgent expenses depends on your resilience and lifestyle, as well as your family’s. But the long-term results are equally rewarding for those who can persevere.
Here are some common household expense-budgeting methods used by experts:
- Important Matrix: Helps distinguish between urgent drains and those that are not. You can use this method in conjunction with other methods because no spending limits are assigned to it.
- Kitchen and Lifestyle Classification: Helps limit the frequency of lifestyle spending to limit spending and organize it better. You can group your kitchen expenses and allocate them to your monthly shopping list.
- Set a budget for everything: This method is perfect for single people without children or working couples. First, remove the amount you save from your monthly income and distribute the remaining money to other expenses. This method allows you to allocate your budget and use it as pocket money.
- Good investors who use budgeting as a ladder to accelerate wealth creation spend a couple of minutes each day listing their expenses throughout the day.
2. Schedule a time to review your bill
This may sound like budgeting, but it’s not the first time you’ve done it. It’s more about checking your spending, and this step is the most important for people who use credit cards. Credit cards may be a cause of great stress and financial strain if not properly managed.
You should evaluate your credit cards and other expenses at least once a year. This is to account for charges that may not appear on your expense sheet every month.
These fees, such as subscriptions to OTT services, news and media services, TV channels, and so on, are frequently underutilized. Because most of these services charge for the entire year, you may easily forget about the unused subscription. Subscriptions, on the other hand, will automatically charge your credit card every year.
Take advantage of this opportunity to cancel any unnecessary subscriptions on your credit card account. Even better, avoid using automatic renewal as much as possible.
3. Get adequate health and risk insurance
Once you start making a budget, you’ll end up with a surplus every month. The first thing you need to do with this extra money is to plan for contingencies and purchase health and risk insurance for your family.
The best-term insurance plans will offer both essential and incidental coverage as additional benefits, such as increasing your insurance coverage for a fixed amount and the option to increase insurance coverage for important life events such as marriage and childbirth.
If you are married and already a parent, you should choose the first option so that your life insurance will automatically match your income.
4. Build an emergency pool
Once you’ve secured your family’s boat for all eventualities, it’s time to build up your emergency fund. As you probably know, emergency plans cost money, even small amounts, and there is no insurance against loss of income due to unemployment.
If you don’t have insurance, you have to bear that risk. An emergency fund can do just that. The goal is to have 3-6 months’ worth of your salary in this pool. However, given the current situation with the coronavirus, it is possible to aim even higher. However, keep in mind that, due to low savings interest rates, funds in your emergency pool may not help you build wealth.
5. Plan for and begin investing in long-term goals for good financial life
After you’ve implemented your contingency and emergency plans, it’s time to consult Unique Investment Advisor on how to invest in your family’s long-term financial goals. Also, except for the insurance, the majority of the investments you’ve made thus far do not give you any tax benefits.
If you have contributed to a provident fund through your work, you already have one Tax Reduction Services-free savings plan in place. However, given the rate of inflation and your expanding lifestyle, you will need to make more investments to reach your
The following are the priorities for which you should begin saving right away:
- Retirement Objective
- Higher education for the child
- The child’s marriage ambition
- Monetary goal
- Other short-term objectives include a vehicle, a second home, home loan prepayment, and so on.
Saving for short-term goals is vital because ignoring them for too long may cause your long-term finances to suffer. You can start a single investment plan like ULIP to accumulate funds toward these goals.
You can invest in variable amounts starting from the minimum premium. To continue to enjoy tax-free benefits, limit your investment to 8% of the insured amount. Invest a small amount of your funds in stocks. So you can achieve better growth towards goals that you end up putting off.
Moreover, ULIP plans are the best investment plan for children, as they ensure that your maturity level meets your child’s goals even when you are not present. With this option, you can choose between equity and debt investments, enabling you to create a portfolio that matches your level of risk tolerance.
For example, Canara HSBC Life’s Invest 4G plan has targeted protection. If you choose this option and you die early, the insurance company will invest the premiums due in your name until the due date.
Your family receives a lump sum upon your death, and the investment portion of the policy remains in effect until its scheduled maturity. If you can’t compromise on your goals, this option is for you.
In conclusion, managing your expenses, rational investments, and different types of insurance are the main steps for increasing the financial future and safety of your family. Whatever makes you think about financial security and whatever makes you take some responsibility, is a good first step.
