Try these five tips related to financial planning at the beginning of your career, your family's financial future will be bright
The festival of Ganesh Chaturthi was celebrated across the country last week with traditional pomp and gaiety. Lord Ganesha has many names. These include disruptors. Most of the people know him by this name to remove their troubles and pains. On one hand God solves the problems of his devotees. On the other hand, you can be your own obstacle this Ganesh Chaturthi. You must be thinking how can this happen. Let's discuss this:
create emergency fund
Emergency does not come. An emergency comes suddenly in the life of any person and in the blink of an eye, your sound financial planning gets derailed. The COVID-19 crisis has shown how things can change in a matter of days. It has also increased the level of financial pressure. However, if you have an emergency fund in your portfolio, then things may turn out to be a bit easier for you. It not only proves to be effective in getting you out of difficult situations, but also resolves your important commitments easily.
In such a situation, create an emergency fund equal to your one year's expenses. For this, invest in such liquid assets, which you can access whenever you want. You can invest in liquid funds or bank fixed deposits to build an emergency fund to help you through your tough times. To build this fund also follow the principle of Safety, Liquidity and Return (SLR) as you should also consider returns while creating an emergency fund. Do not divert it to any other item and keep enriching it from time to time.
Buy life and health insurance
Insurance, one of the important components of personal finance, protects you and the people dependent on you financially in case of any sudden emergency. For life you should go for a term life insurance plan. Term plans are the cheapest way to buy life insurance and you get a large sum of insurance cover at a nominal premium. You can get term insurance up to Rs 1 crore at a premium of just a few thousand rupees.
Similarly, health insurance covers you from savings expenses and provides you financial support in case of any medical emergency. Considering the inflation rate in the medical sector in the last few years, it can be said that medical insurance has become an indispensable need of modern times.
If you are living in a metropolis then you must take a family floater plan of Rs 10 lakh. Also buy an additional Rs 5 lakh top-up plan to increase your coverage. Along with this, it is also important to assess your coverage from time to time and fill the gap.
Invest in Equities to Beat Inflation
Inflation reduces the value of the rupee over time. In such a situation, the risk of losing your desired fund may arise. However, you can beat inflation by investing in equities. Equity comes in such an asset class that has the potential to beat inflation in the long run. You can invest directly in stocks or take the help of mutual funds.
If you have a good knowledge of the market and can understand the data and keep an eye on their movements, then you can invest in stocks directly. If not, then mutual funds are a better option. You can beat inflation if you have a fair amount of equity in your portfolio.
Diversify your portfolio
Diversification of portfolio helps you manage risk in a better way. Diversification into different asset classes gives your asset class some sort of stability.
Maximum diversification ensures that if one asset class does not perform well, another makes up for it. However, too much diversification is also not good and will make your portfolio so broad, which will be difficult to track.
Now the last tips
With financial discipline and the steps mentioned above, you can overcome all the obstacles and keep your position strong in times of crisis.