Here’s what you should do to protect your family financially

Everyone would want to protect their family’s future financially. However, many individuals fail to do so as they don’t invest in the right financial instruments. Also, there is a lack of intent seen in their actions. When people finally take protecting their loved ones seriously, they would be a little too late. 

Most of us are working hard to accumulate money to enhance the family’s fortunes and secure their future. Just doing this won’t help as there are uncertainties that you have not considered. To truly protect your family, the uncertainties should not have their effect on your family in any way. 

Therefore, the accounting of uncertainties is inevitable while you layout your financial plans. An accident or a sudden job loss would put your family in a spot of bother and if you don’t have any backup plans, then who would provide for your family? Should your children stop continuing their education?

Well, reading this would have made you feel chills down your spine. The availability of various financial instruments and making simple lifestyle changes will make securing your family’s future easy and effective. It doesn’t take much apart from needing the intent and investing a small portion of your salary regularly in suitable options. 

Here are the simple steps that will help your secure family’s financial future:

1) Save money by keeping your lifestyle simple:

This is the foremost step that one can take towards securing the future of dependents. You need to sit down and analyse your family’s lifestyle. Identify the unnecessary expenses and try to minimise it to as low as possible. You should follow the thumb rule of 50:30:20 while spending your income. That is, spending 50% on needs, 30% on wants and save/invest the remaining 20%.

2) Build an emergency corpus: 

Having an emergency fund is inevitable in this world of uncertainties. If a medical emergency lands you or any of your family members on a hospital bed, then you should be ready to spend a significant sum on the hospital bills. If you don’t have enough money, then you will have to depend on others or avail loans. 

If an unfortunate incident leads to unemployment or your business suffers unexpected losses, then you wouldn’t have any income. If you are the breadwinner of your family, then your dependents would be in a miserable condition. If you have an emergency corpus, then you can fall back on it until you have found other sources of income. 

Also Read: Benefits of mutual funds savings against chit funds

3. Clear your debt at the earliest

Having an outstanding debt is one of the most onerous mental burdens that one can have. If you are paying your home loan mortgage and if by any chance, an unfortunate incident takes your life, then you would be leaving your family in debt. If your family members are not in a state to clear the outstanding debt on the house which you left behind, then the home loan lender may ask your family members to vacate the house to recover their dues. 

4. Avail suitable insurance

Medical expenses are extremely costly these days and to counter that, all you should do is avail a family floater health policy with sufficient coverage. This will take care of most of the big-ticket medical expenditures and rules out the need to spend money from your pocket on medical emergencies. 

Apart from health insurance, the breadwinners should avail term insurance. Term policies pay out the sum assured (which is a considerable sum) to the nominees when the insured dies and thus acts as a substitute for your income. You can also consider availing property insurance to protect your dream home from uncertainties. 

5. Invest in the right plans

There is no instance of a person getting rich by investing all his/her savings in a regular savings bank account. In order to get rich, you should invest in suitable schemes. If you are not willing to bear any risk with your investments, then you can consider investing in provident funds, pension plans and bank and post office deposits. However, investing in these schemes offer limited returns. 

If you are fine with taking some risk, then you can consider investing in mutual funds and capital assets. These options offer much higher returns than conventional investment options. However, there is some risk involved, and you should analyse your risk profile and requirements before making any investment-related decisions.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in