Creating a financial plan at different life stages is a vital task. You need to devote your time and ensure that all ingredients are in the right place. A financial plan that is apt for you may not apply to someone else. So, given below are financial planning tips for families at different life stages. We will help them in their financial planning and suggest ways to fill the gaps.
Scenario 1 – Young Couple Without Child
Yash and Ruhi are in their 20’s, they got married a year back and are looking for some investment tips. So, let’s ask questions to know what the best possible plan for them can be. Find out what is their answer to the following question:
What is your current income, expenses, goal for life, current insurance and investment?
Yash And Ruhi Answered:
Our combined monthly income is 70,000. Considering our current lifestyle, we allocate 50% of our income to household and other related expenses. Our goal is to buy a house and insure ourselves for a better tomorrow, as we currently have no insurance in place. Also, we feel that we are left with very few savings in our hand at the end of the month (considering our frequent dinners and other outings)
Financial Planning Tips For Yash And Ruhi
Start Investing: Although you are spending a significant part of your earnings as you have no dependents (children), or maybe you feel that you don’t have enough money to start saving, however, in reality, it is the right time to start investing even if it is in smaller proportions. At this time, equity is the best option for you to generate high returns in the long run. As you are young, keep a high proportion of funds in equity as compared to debt.
Buy Term Insurance: Additionally, buy life insurance which would ensure that in the case of your demise, your spouse will be financially secured. As more and more young individuals are becoming susceptible to life-threatening ailments (cancer and heart diseases), it becomes important to buy life insurance now (as its premium increases with your age).
Tip: To enjoy the power of compounding start investing early.
Scenario 2: Couple With School-Going Children
Hemant and Neha have two beautiful school-going children. Their expenses mainly include household costs, children’s education expenses and a home loan. Their personal goals include planning for their children’s education, marriage, and retirement. Given below is their answer to the following question:
What are your current expenses, income, goal for life, current investments?
Neha is a homemaker; her world constantly revolves around our children and our house. My monthly income is Rs 65,000. I have to pay a regular EMI for a home loan which is Rs 18,000. I have term insurance and a family floater health insurance in place. Apart from these two investments, there are no other investments made.
Financial Planning Tips For Hemant And Neha:
Enhance Your Insurance Cover: If you have a life insurance cover in place, make sure it is sufficient as per your current financial liabilities, like home loan, child’s education, and other expenses.
Buy A Child Insurance Plan: Buy a child ULIP plan to finance growing needs of your children. This plan will not only give sufficient money to fund your children’s education but will also secure their future in your absence. In case of your demise, the insurer will waive all future premiums, and the child plan will continue to offer coverage till maturity.
Buy ULIP Retirement Plan: While securing the future of your child is important, it is vital to protect your life post-retirement. With time on your side, invest in a good ULIP retirement plan and invest a major portion of your funds in equities.
Cover Your Kids Under Family Floater Health Plan: Cover your children under the family floater health insurance. Additionally, it is wise to buy a comprehensive health insurance policy which can cover you against critical illnesses too- e.g. Cancer insurance.
Tip: As time is on your side, invest in equities and different types of life insurance to reap maximum benefits.
Scenario 3: Couple with Teenager Kid (nearing their retirement)
Anand and Lata are proud parents of a teenage boy who wishes to become a successful data scientist in coming years. Anand is the only earning member of the family. Thus, Anand has a financially dependent child (for higher education) and a spouse. He also needs to meet their monthly expenses and plan for his retirement.
What are your current expenses, goal for life, current investments?
My monthly income is Rs 50,000, and expenses are mounting day by day. I have a child insurance plan in place which will take care of my child’s education.
Considering that the child plan takes care of my child’s education, my only goal is to secure my retirement. Also, my increasing age is a concern, as far as lifestyle diseases are considered. I have a portfolio of stock-market related investments.
Financial Planning Tips For Anand And Lata:
Have A Clear Idea of Your Situation: At this stage, you may be planning to retire in next ten years. In case you have a portfolio of investments to tide over financial contingency, well and good. However, in case there is no portfolio, you must reduce your expenses to a level which is sustainable. If you do not control your expenses, you might outlive your funds, and it is a situation you should not be in.
Buy A Health Contingency Plan: As your age progresses, the chances of falling ill are also increasing. So, you should buy a comprehensive health plan for health emergencies.
Maintain Correct Asset Allocation: At this stage, make sure that your portfolio is not subjected to high risk, and therefore, minimize your exposure to equity. Ensure that the child insurance plan helps your child with his different educational needs. Review your financial goals and see if you are short of meeting them.
Tip: Make sure to be debt-free before retirement.
Financial Planning – Conclusion
Most individuals avoid financial planning as they think it is just about budgeting. However, the truth is, financial planning is about making smart investments to meet long-term goals. So, start investing today to secure your tomorrow.
If you are interested in even more finance-related articles and information from us here at Bit Rebels then we have a lot to choose from.