What comes to mind when you think of financial planning? Investing is surely among the first things, right??
Beginning to?invest?as early as possible is advice most of us tend to get, especially in our careers' early days. While that should indeed be a priority, there are?some financial tasks you should ideally do before you jump onto the decision to start investing.
After all, investing is just part of the financial planning process, implying that there are other crucial tasks as well that you need to take care of when you begin financial planning.
No matter how much you are earning, whether it is Rs 30,000 per month or a six-figure salary or income such as Rs 2 lakhs per month,?having a?budget?is an absolute necessity.?
Every month, you should have an estimated budget as per your expenses and lifestyle, which will help you get into the habit of saving something from your income. But more often than not, having a big number in mind makes the target look unachievable.?
That is why you can instead break it down.?
Each day and week gradually builds up to an entire month, right? So why not use this breakdown to make your budgeting task easier??If you find it difficult to control your day-to-day or weekly spending urges and end up regretting it at the end of the month, then consider setting daily or weekly targets for yourself. After all, looking at a target of saving, say Rs 5,000 per week, sounds much more doable than looking at a bigger number, like Rs 20,000 per month.?
So, breaking your monthly target into daily or weekly ones would allow you to ultimately achieve the monthly target of sticking to the set budget!?Click here to learn about various saving habits that can help you budget.
Also Read:?Benefits?Of Investing In Mutual Fund Through?SiPs
It's often the rainy days that make us realise the importance of an umbrella, right? Similarly, it's often a financial emergency that makes us realise the importance of having an?emergency fund, also known as a contingency fund or a rainy day fund.?
This fund acts as a cushion during financial emergencies that can be in the form of a sudden job loss, severe illness, disability, or significant pay cut. In all such adverse events in financial life that can temporarily hamper your income inflow, having an emergency fund is what can rescue you by helping you carry on with your recurring monthly expenses.
It is usually advisable to have an emergency fund with an amount equal to?at least six months of your recurring monthly expenses.?The size can be even bigger, such as 9¨C12 times the monthly expenses, if you can maintain that size. After all, the bigger, the better!??
Also Read:?Want To Be A?Millionaire? Here's How Much?Time?& Money It Takes
If you don't have?life and health?insurance?despite the COVID pandemic and mass layoffs being massive wakeup calls, then wonder what is holding you back from understanding the importance of these two. Buying insurance is an important step towards laying a strong financial foundation.
Firstly, the primary objective of buying a life insurance policy is to provide a replacement income to your dependents in the event of your untimely demise. Make sure your life insurance coverage amounts to at least 15 times your average annual income. You can prefer purchasing?term life insurance?over other life insurance products as it provides large life coverage at very low premiums.
Secondly, in addition to term insurance, it¡¯s equally important to have?health insurance.?Keep in mind that having a health insurance policy with adequate coverage reduces the risk emanating from rising healthcare costs. Also, not having health insurance means that a single hospitalisation bill can eradicate your lifelong savings.
One should also remember that even if their employer provides coverage under group health policies, such coverage is usually inadequate to meet hospitalisation costs, and such policies lapse once they switch organisations. This leaves you without health coverage until you get covered through another employer-provided health plan.
Click here?to understand the benefits of buying health insurance.??
For the latest and more interesting financial news, keep reading Indiatimes Worth.?Click here.