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This article is more than 1 year old.

Here's how you can plan for a secure future

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During the past few months, the world has been besieged by the COVID-19 pandemic. The pandemic has brought into focus the need to revamp the public healthcare infrastructure in India.

Here's how you can plan for a secure future
Authored by Vishal Bhave
During the past few months, the world has been besieged by the COVID-19 pandemic. The pandemic has brought into focus the need to revamp the public healthcare infrastructure in India.
It also brought home the fact that if we are to take care of our health and related consequences of any adverse health event, we have to become “atmanirbhar”. There is the realization that the virus is here to stay and we need to live with it while ensuring we take adequate precautions.
As people realized that COVID (and any such event) can impact the healthiest of people, increasingly insurance was a topic that gained prominence in public discourse. The Insurance regulator directed insurers to come up with COVID specific policies.
While the utility of such covers will be for a limited period and purpose, it definitely has helped put the focus on insurance per se.
Will this result in higher insurance penetration? Here, consumer behavior towards “protection” will be a factor. With the country getting “Unlocked”, are we taking enough precautions as we slowly reclaim some part of our “old normal”?
While we see many people wearing masks, we also see many without masks or having “chin masks”. If a pandemic like this doesn’t force us to change habits, what will?
The mask is like our insurance policy - a small inconvenience (“premium”) to be paid for protection against adversity (financial loss). We can draw a broad analogy between the mask-wearing styles and insurance coverage of people:
1) People with masks
– having adequate insurance cover
2) Those with “chin masks” or “masks under the nose” or using masks intermittently – have some insurance (Corporate/ group insurance and/or a small individual cover) but in reality, not adequately covered
3) People not using masks – not having any insurance and having a mindset of “this can’t happen to me”/ “don’t like to think about the possibility of any negative events” / “I will think about insurance later”.
Enough has been written about the low insurance penetration in India. Though winds of change are blowing, a lot needs to be done for the populace to internalize the importance of Risk Protection through insurance.
However, beyond insurance, it is equally important to spread awareness of the need, and ways to plan personal finances and investments, keeping in mind one’s financial position and future goals. While the importance of Financial Planning always existed, post-pandemic, it has become imperative.
So how does one go about “Financial Planning” and “Risk protection”? We need to demystify the terms and the process for the Aam Aadmi.
Financial Planners have a simple framework - the “Financial Planning Pyramid”, for managing one’s personal finances. The basic rule is to start from the bottom of the foundation (covering needs) and climb up the pyramid (transiting to planning for desires as we move up).
Starting from the foundation level of the pyramid, the steps are explained below in simple terms.
The questions put forth are some important questions one needs to ask; the broad level solution is mentioned alongside.
Lifestyle 
Protection
“What if the earning member(s) are not around tomorrow? How will the family repay any existing loans? How to ensure children’s education and aspirations are not impacted? I don’t want family’s lifestyle to get impacted” – Get adequate Life Insurance
Risk Mitigation
“What if my Income stops for whatever reason?” – Arrange for an Emergency fund for one year “Will I be able to afford exorbitant expenses for treatment due to any adverse health event in the family? Any funds planned for other future plans shouldn’t get sacrificed” – Get Health Insurance, Critical Illness cover, etc. “Are my assets covered?” – Insure your assets (Car, Home, Business-related) “Can I retire my debts? Which ones should I prioritize?” – Plan for repaying debts starting from high-cost debts and those which are not backed by any appreciating assets
Savings and wealth accumulation
“What are my goals? E.g. When do I buy a house; how much would it cost then? When would I need funds for children’s education/wedding; how much? Is there any other estimated big expense apart from normal expenses? How much do I need for a long-cherished desire/want (travel, luxury car, etc.)?” - Make a broad Plan with timelines and estimated costs and a basic cash flow statement “How do I grow my wealth? Where should I invest? Will I accumulate enough for my retirement years? Can I actually retire early?” - Make your Investment Plan – a well-diversified plan based on risk appetite and time frame for specific goals
Wealth Distribution
“What legacy do I leave behind? How do I distribute my wealth and assets?” – Estate Planning In simple terms, the approach should not be “Earn – Spend – Save” but “Earn – Protect – Save – Grow – Spend - Share”. One doesn’t need to be a Finance wizard to plan for a secure future for self and family. All it needs is good old fashioned discipline, common sense, prioritization of needs and wants, and a sense of responsibility.
Vishal Bhave is an alumni of IIM Calcutta and a seasoned business professional with extensive experience across consumer banking and insurance. Views are personal
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