An important factor that is a foundation for long-term happiness is being financially secure in life. This does not mean that one blindly pursues money, but it must be noted that being financially secure protects us from various pitfalls and unforeseen stresses of life. This removes one barrier that many people face in pursuing their dreams, taking care of their loved ones and exploring life to the fullest.
For instance, the pursuit of higher education of a family member may be discouraged by some families who cannot afford it. To avoid these scenarios, one can plan ahead and ensure that at least one’s life goals are backed by the necessary finances. The two prongs of good and sensible financial planning include investment and insurance. In this piece, we discuss how these tools can be used to plan your finances.
Steps to Secure your Long-Term Financial Goals
- Work your way backwards: It is important to note down your important life goals in advance, such as higher education, marriage, children’s education, starting a business or buying a house/property. These vary from individual to individual, depending on their aims and the stage of life they find themselves in. The next step is to put an approximate number on the amount of money required to back this financial goal. Now using a compounding interest calculator, one can calculate the necessary monthly savings and investments one requires at a reasonable rate of return in order to reach this financial goal.
- Asset Allocation: The next step is to diversify your portfolio across various financial instruments. You can start with an emergency liquid fund that takes care of at least 3-6 months of your expenses in case of any unforeseen circumstances. Post this, you can invest in equity instruments for higher returns over time (with a time horizon of at least 3-5 years), debt instruments for safer and steadier returns, and also include hedges such as gold in your portfolio. This would depend on your time-horizon and risk appetite as an investor.
- Do not overlook Insurance: While these investments can take care of your financial goals in the long term, many people overlook the importance of health insurance and term insurance. An unforeseen medical issue can cause all of your financial planning to be rendered useless, given the high cost of healthcare. Similarly, an unforeseen death of an earning member of the family can not only cause grief, but also hamper the family financially. Thus, one must not overlook important instruments such as health insurance or term insurance. There are instruments such as Bajaj Allianz Life POS goal suraksha, which helps you grow your wealth alongside offering the benefits of a life insurance. POS goal suraksha also offers guaranteed maturity benefits, option to premium payment mode, guaranteed additions at maturity and a lot more.
Insurance and investment – together
Investment and savings planning are a matter of priorities and budgeting. The aforementioned suggestions regarding insurance and investment can be customised according to everyone’s individual needs. For others who want to refrain from carrying out such elaborate financial planning, there are options that take care of everything – a case in point being unit linked insurance policies or ULIPs. Here’s how ULIPs work –
ULIPs allow individuals to save while also getting a life insurance cover. These plans take a part of the premium paid by you and assign it to your insurance cover while diverting the rest of the funds towards investment tools like debt, equity or both. The returns on ULIPs are dictated by the type of plan bought by you. If you invest in ULIPs in India, you can get the freedom to choose the right life insurance cover as well as investment for you, and get the benefits of liquidity, tax benefits and goal-based planning.
In a Nutshell
By following the above steps, you can secure your long-term financial future. To ensure that your loved ones are secured financially in case of an unforeseen death, make sure to purchase an appropriate term insurance. You can head over to a reputable insurance aggregator platform to find out more information on the right type of plan for you and explore a wide range of products to secure your financial future.
