Life often throws us unexpected surprises. The current Covid-19 pandemic is one such example. The financial ramifications of such situations are huge for most of us. There are certain things that are beyond our control. But at the same time, we can control and plan for some things in advance. And these can help us to soften the financial impact should any crisis hit us out of the blue.
Here are the top 10 items to consider in your financial health checklist for this year. You should attempt to tick off most of the items(if not all) from this list in order to safeguard your finances.
- Build an emergency corpus equal to 9-12 months’ worth of expenses. Keep the emergency corpus as liquid cash(in the bank or at home), liquid mutual fund and overnight mutual fund
- Take a family floater health insurance worth Rs.15-20L. Read through the policy documents carefully and ensure that it covers the major illnesses
- If you have dependents, take life insurance as well. Typically the life insurance cover should be 10-15 times your present annual income
- Take an accident disability insurance to compensate for the loss of income should there be any mishap
- You may consider buying separate insurance for critical illnesses as well. Usual health insurance plans don’t cover these. If someone is diagnosed with a critical illness, they will immediately get a lumpsum payment to cover the costs of treatment and other expenses
- For life insurance, buy a term plan offered by reputed health insurance companies such as ICICI Lombard, Religare insurance, etc. Avoid the traditional LIC endowment plans that offer sub-optimal coverage and returns but charge a hefty premium on the other hand
- Save at least 40% of your monthly income and invest it into buying assets
- Avoid taking loans as much as possible. Instead, plan for your purchases well in advance and invest for the same. It’s OK to delay the purchase for some time until you have saved enough rather than taking a loan
- Even if you do take a loan, ensure that the sum total of all your monthly EMIs do not exceed 30% of your monthly income
- Invest in a variety of assets such as equity mutual funds, stocks, debt mutual funds, PPF, NPS, gold, Government bonds, etc. to diversify your portfolio. This will help to ensure that your investments are able to withstand the volatility of the market in any situation.