Birthdays call for celebrations and celebrations entail expenses. Be it a new dress or a new car or a birthday bash with your near and dear ones, expenses never stop. But, in that melee, will your financial planning goals suffer a setback? How many of us actually think of creating a prudent financial portfolio earlier in life so that the future is financially sound and secured? Very few actually. Even though turning 30 is a milestone in every individual’s life, financial planning often takes a backseat. You may plan on marrying or having a baby or buying a new home but financial planning is not given proper thought or consideration. Have you ever wondered how you will secure your child’s future 10 or 15 years down the line or how will you make payments for a home loan or will your salary be sufficient to cover your EMIs?
Before turning 30, there are certain financial decisions you should make as early as possible for a stress-free future where financial contingencies are a far cry. So what are those decisions? Here’s a list of 5 basic decisions that are almost universally applicable, so let’s take a look.
1) Insure Yourself – there is actually no specific age for taking out an insurance policy and the earlier you start the better. By the age of 30, you are probably one of the contributors to the family income if you are in the joint family system or the main bread-winner in your nuclear family. Even though your spouse earns, there will be financial loss in case of any unfortunate event. Insuring is always the best answer for income protection and buying a term plan with a considerable coverage is also affordable.
2) Health is Wealth – moving on from life insurance, can health insurance be left far behind? In the year 2012, the insurance sector reported a surge in insurance claims to 47% as compared to 15.8% in 2004 and that too in the age group of 26-35 years. Yes, though you are turning 30, modern lifestyle has given rise to newer diseases which do not consider age while attacking the individual. So don’t be foolish and invest in a health plan probably a family floater one to cover the entire family. If affordability is a factor, you can start low and then add a top-up plan with your base plan for complete protection.
3) Emergency Fund – oh yes, emergency is synonymous with insurance, but other than death and health related emergencies, there may be others too. The most basic example – loss of job. Yes, here neither your life insurance nor your health insurance will cover for your expenses. You would either have to liquidate your deposits or withdraw from your mutual fund investments. Therefore, having an emergency liquid fund is important. So maintain about 5 times your monthly income in a emergency fund which is liquid in nature or any other liquid funds for use in those rainy days.
4) Buy an SIP (Systematic Investment Plan) – mutual funds have really become attractive with the diversification they provide and with a positive trend observed in the stock market, investing in an SIP of any good performing mutual fund house is the next best decision you should make. Starting early gives the benefit of compounding returns where the money grows exponentially over the years. So when you need funds for your child’s future or for buying a house or for that much-awaited Europe trip, you won’t have to look anywhere else. In fact, investing in multiple SIPs is ideal taking into account the quantum of savings.
5) Plan for Retirement – Retirement is the last thing you think of when you just hit the 30-year age mark. The whole life ahead seems too short to accomplish all you desire and the thought of retirement leaves a sour taste in the mouth. But planning early is the key to a comfortable retired life. Post 40 when majority of people plan for their retirement, the accumulated corpus falls short because of other liabilities. So open a PPF Account and start saving a little amount every month. Let compounding do its magic and you won’t have to worry about your retirement corpus.
I listed the most basic decisions needed to be made in your youth to have a comfortable mid-life and old age. I am sure most of you reading this can associate with the decisions listed. So, enjoy the excitement of youth but make sure to also plan for your finances because if you don’t then who will?
You may also like to read : Smart Moves To Save Smart: Financial Decisions To Consider Before The Big 30