You may have been planning your investments after thoroughly gauging all the options available, to make sure you are secure from any financial hazards. But there are always things that may be beyond your control.
Good management of money is the key to security in life, at least financially. You may have been planning your investments after thoroughly gauging all the options available, to make sure you are secure from any financial hazards. But there are always things that may be beyond your control -- a global slowdown, for example.
Here are certain ways to make sure you protect yourself from any untoward emergency that may be beyond your control.
Emergency Fund: This consists of that part of your savings which is left untouched. Ideally, it should cover your basic needs for six months, and should be created by way of systematic investment plan (SIP) or any bullet payment that you may receive (yearly bonus or maturity of existing investments).
Continue routine investment: As per your budget allocation and after eliminating the debts, continue your regular SIPs, monthly investments and savings, to create a corpus.
Diversify the portfolio: Don't put all your eggs in one basket. You need to create a well-diversified portfolio consisting of all asset classes to cut your risks.
Get out of debt: A financial crash leads to recession, and can impact your earnings, job security and business prospects. Make sure you raise debt only for essential priorities. Make sure to budget a space of four months for servicing your debts without compromising on your basic needs, in case of an emergency.
Medical Expenses: Good health can create good wealth. If you're in your late 30s, you're still in a good position to go in for a Mediclaim policy for your family. Medical emergencies are unexpected and unavoidable, but you need to ensure that at any point in life, you should have sufficient financial protection for any unforeseen medical emergency.
Monitor Expenses: Some expenses are essential while some are driven by impulses. There may be times when there's a very thin line between necessity and luxury. It is always prudent to reduce your unnecessary expenses or delay them. Use your credit card wisely and always remember that a credit card only gives you an extended time to make a payment, but eventually, what you pay is purely your out of your own pocket.
Additional Income: Always try to have an additional source of income, especially in the era of a global-local market. There are many opportunities for doing a side business. You can freelance, you may be able to earn extra money by monetising your hobby or passion. Think out of the box, and make sure to take the benefit of the Internet era, which has made marketing talent and ideas very easy.
Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at www.mangoinvestor.com. Readers are invited to send their feedback to rishabhparakh@moneyplantconsulting.net.
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