Do you know are your basic finance is taken care of?

If you lose your job, can you maintain your daily expenditure for 1 year? If a medical emergency arises, do you have an adequate amount to pay? If a solo bread earner passes away still your family can financially be stable without your presence.

If your answer is yes then there is no need to read this article. If your answer is no then this article will be very helpful to you.

The main basics to be covered are

Emergency Funds: – 

These are funds needed in case of emergencies like Job loss. For example, you are earning 1 lakh rupees monthly and you have 50k expenditure monthly like house rents, groceries, and utility bills. So, you need to a minimum of 6 months expenditure (3 lakhs of emergency funds).

The best place for your emergency funds is in Sweep FD where you will get more returns than a savings account if it is not used and will be handy whenever you need it. You can think that you can invest in assets like land for high returns but liquidation is a big problem. You might also think of stocks, but when you need the amount, the stocks might be at the bottom so this is the wrong time to withdraw the stocks. So, start accumulating the Emergency funds in Sweep FDs.

Term Insurance: – 

Do you know most families will bankrupt or lose their peace of life when a solo earner passes away, then his family will struggle with daily expenses.

For Instance, I have seen a family of my friend who is doing business and has some debts for his business suddenly pass away. Till then they are leading a happy life, but suddenly they don’t have any financial support for at least day-to-day expenses. Think about the future of his wife and children struggling. You might get into the same situation, so plan well for your family’s secure life.

To keep your family secure you need to take term insurance, although you are not there with them, It will give them financial stability.

How much Term Insurance is required to keep you need your family secure without you?

You need to take at least a term insurance policy sum of your loans, and expenditures for the next 20 years of your family and children’s Needs. If these are covered your family can have a peaceful life.

Health Insurance: – 

Nowadays medical bills change the financial situation of a family. one critical illness to any of our family members can damage your financial situation and these are very critical and can drain your entire savings and make you fall into debits. 

For instance, One of my friends who is earning 6 lakhs per annum living a happy life, Suddenly his mother needed critical surgery which costs around 20 lakhs amount. He has a savings of 3 lakhs but he needs the remaining 17 lakhs and as this cannot be avoided and is needed on an emergency basis, he goes for a loan or lends money from his relatives or friends for high Interest rates.

Let us assume he has taken 24% interest from a friend so, he needs to pay 34 thousand monthly as interest, Now how can he pay the interest monthly and repay the amount of 34 lakhs with his minimal income? So to avoid these kinds of situations and to keep your Financial situation secure, you need to take Health Insurance.

Retirement Planning:-  

Have you thought about life after retirement? Till you are working everything looks good. But once you have stopped working and have no monthly income, Can you survive?

For Instance, one of my father’s friends who has done a private job for 30 years spent his entire earnings on his children’s education and children’s marriages. He has nothing for survival, He thought his children would take care of him and his wife, But his children left him. Now he is living in an old age home in a critical situation and no money for his medicines.

To avoid this kind of situation you need to plan your retirement by investing in Passive incomes and Pension schemes. 

So the major things you need to cover for your financially stable state are Emergency Funds, Term Insurance, Health Insurance, and Retirement Planning.