Financial planning is very important if you want to achieve all your life goals. To make sure that you and your loved ones can enjoy retirement peacefully, you must build and manage a sound financial plan for all your savings and investments. Financial planning is a lot more than random deposits in a savings account and investments from time to time. Such investments will result in an inefficient utilization of your resources. If you want to achieve your goals, then you must come up with a proper plan.
The first thing that a proper financial plan will provide you with is a roadmap for your future plans, financial requirements and financial goals. Some of the basic items that you will include in your financial goals are ownership of your own house, your children’s education, annual vacations, etc.
Another important aspect of a sound financial plan is a contingency or backup plan that will provide you with the necessary funds if you are under any critical circumstances. This will involve asset allocation, expense budgeting, goal evaluation, etc. Here are the basic steps involved in making financial plans.
- Define and evaluate your financial goals: The objective of financial planning is to help you achieve all the financial goals that you have in mind. After you are done listing out your goals, you should categorize them under short-term, mid-term and long-term goals. Make sure that all your financial goals are SMART - Specific, Measurable, Attainable, Realistic and Time-Bound.
- Start by outlining a budget: You need to draw up an itemized list of your future income and the foreseeable expenses that you’ll have to incur. By drawing up a budget, you will be able to keep all your expenses in check and manage your debts properly.
- Keep money aside for emergencies: It is an undeniable fact that even the best planners cannot foresee every possible situation. To make sure that you are not caught unprepared, you have to come up with a proper backup plan. One of the most important elements of a backup plan is a reserve fund that is set aside for contingencies.
- Proper asset allocation: You must remember that proper asset allocation is the backbone of a sound financial plan. By investing in the proper channels and creating a diversified portfolio, you will be able to achieve all your financial goals within the time horizon that you have in mind. You should structure your asset allocation in a proper way.
- Review your financial plan regularly: Your financial plan should not be inflexible. Draw it up in such a way that you can make modifications according to the present situation. The best way to keep track of such situations is to review the progress and success of your plan regularly. Weeding out bad investments is a highly important task.
The importance of health insurance
Every single person in the world has to fall prey to unforeseen circumstances - sudden familial deaths, sudden business downturns, legal cases, health complications, etc. It is very important to be insured as you never know what circumstances are waiting for you around the corner. Since medical expenses are going to be very expensive, you need to invest in a comprehensive health insurance policy so that you can receive proper coverage in case you have to be hospitalized. That’s why health insurance is so important.
According to a survey conducted by Livemint in late 2018, around 56% of India’s population have not invested in any sort of health or medical insurance policies at all. The survey went on to discover that more than 75% of this population are not covered in a proper and comprehensive manner. Since such a large number of people decide to skimp on health insurance, they all have to incur out-of-pocket expenses when the worst does occur. It’s extremely important to remember that not being properly covered is just as bad, if not worse, than not having insurance at all.
Investments or insurance?
Although investments are such an important element of financial plans, insurance is just as important. If you want to lead a full and financially secure life where you and your loved ones are well-cared for, then you need to get started on coming up with a sound financial plan. The best way to do this is to allocate a sizable chunk of your assets to investments and an equally sizable chunk to sound insurance policies. The most important insurance policy of all is health insurance, which will protect you and your family in the event of hospitalization or medical emergencies.
If you want to make sure that you and your loved ones will be cared for in the event of a medical emergency, then you will need to invest in a proper health insurance policy. Especially in the situation of the coronavirus pandemic, you should look into coronavirus protection plans like the Corona Kavach policy.
If you purchase a proper health insurance coverage plan for your family, here are some of the basic and standard cost coverage that you should expect from your healthcare provider.
- Hospitalization Charges before-and-after: Pre and post-hospitalization period of your treatment is highly important. You have to choose a plan that successfully offers it.
- Cash Benefit: Your insurance should provide you with a lump sum of money every day as compensation for your loss of income.
- In-Patient Expenses: Your health insurance policy will make sure you are covered during your hospital stay, including coverage for ICU charges and PPE kits.
So now you know why financial planning is so important - and also the main reasons why you should devote a lot of attention and resources to proper health insurance for yourself and your family.