Health insurance, life insurance and contingency planning are three important ways to take protection from risk – the risk of financial distress.
Having taught and mentored thousands of students, you very well know the value of timely guidance and tutoring in a student’s life. Teachers add value not only in academics but also help in developing one’s overall personality. The best achievers in sports, arts, business and all walks of life tend to have coaches who guide them. Taking good advice and having a coach is greatly beneficial for your financial life as well. And to make this happen, one should always try to learn things during the journey of life.
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Often teachers are so busy with their students that they can neglect their own needs, such as their financial security, their needs and wants, etc. This can spell disaster for the future. To overcome such situations, they should understand the necessity of giving time to themselves so as to plan out their own finances well on time.
Here are some financial planning learnings which you may consider and follow to have a healthy and wealthy life:
Have adequate risk cover
Health insurance, life insurance and contingency planning are three important ways to take protection from risk – the risk of financial distress. You and your family need a health insurance cover, regardless of the level of your wealth. With skyrocketing cost of medical care, a single hospitalization can leave a gaping hole in your savings kitty. Since you probably have dependents, having a life cover is mandatory.
Amar Pandit, Founder of HappynessFactory.in said that the cover should be enough to take care of your dependents’ needs (and your liabilities, if any) until the dependents can provide for themselves. Buy a pure term policy; skip traditional plans and ULIPs initially. “One should always create a contingency fund for the rainy days. Make a detailed cash flow statement listing down all your monthly expenses. Multiply that by 6. Contribute towards this corpus gradually by investing in a liquid mutual fund and don’t dip into it for anything other than emergencies,” he said.
Have clarity about your financial goals
You are most likely to be satisfied and successful with investments when they are planned and aligned to your goals. However, most people have a random approach to investment. They contribute to ad hoc policies, funds or schemes based on recommendations from friends and family or other unsolicited advice. This approach results in a lack of clarity on how to deal with situations when the products don’t perform as expected, and a lack of confidence in meeting goals. So, think about your family’s goals, create a financial plan to reach these goals and make investments that will help achieve them. Once the plan is made, stick to it and don’t let anything make you deviate.
Plan your taxes with investments
Taxes are an important part of financial planning. Planning your investments right can help you maximise your tax savings. For instance, we all know that life insurance premium, mutual funds & PPF can help you save under Section 80 of the Income Tax Act.
“What is less known is that people with children can also avail of benefits on tuition fee paid under Section 80C. Similarly, the principal component of a housing loan is also eligible for tax deductions under the same section. Thus, you need to know all such options to utilise them in the best way of availing maximum benefits," said Adhil Shetty, CEO, Bankbazaar.com
Get professional advice
A professional financial advisor is a subject matter expert; s/he is someone who is qualified and equipped to advise you on personal finance. Pandit feels that a lot of people today take financial advice from their CAs, Relationship Managers or insurance agents. Just like a student wouldn’t go to a Hindi teacher to learn Biology, you need to consult a qualified planner for your financial needs. “A financial planner will help you take a holistic view of finances, plan for goals and align your savings and investments to meet those goals without stress,” he said.
Organise all your financial documents
As a teacher, you know the value of keeping notebooks safe and in place so that whenever you are in need, you can easily have an access to get them from the desired place. Similarly, when it comes to your own financial planning, you should ask few questions to yourself, for example, would your family members know where to look for the insurance, investments, bank and real estate documents in the event they need to access them? Would they know the points of contacts for each? These things may sound no great deal but, in an eventuality, having all these in place can save a great deal of hassle.
Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions.