better personal finance planning
The finacial problems of a nation, an institution or an individual arise primarily because the resources are limited whereas the needs for expense- present and future are unlimted or far in excess. This is Economic problem. An individual of moderate means often feels difficulty in properly assessing present and future needs, allocation between expenses and savings and to decide investment channels for parking savings.
An individual of modest means will generally feel it difficult to make any saving out of income. The author suggests that whatever be the circumstances, one must. save ten per cent of his income. To begin with, the money should be in saving account of bank. when the savings grow, part of these may be invested in bank Fixed deposits and Post Office saving schemes. As a rule of thumb, six months income should be in liquid channels like bank deposits, mutual funds etc.
When one has at least six month income in Bank deposits, he should consider insurance. Accident Insurance and Mediclaim policy with General Insurance company should get priority. Whatever be the precautions, people run risk of falling sick and accidental injury. In these situations, these policies are of immense help. The Life Insurance policy should be next priority. One should not overinsure whatever be the pressure from Insurance agents. An individual with insufficient current cash in bank and other assets but considerable income and dependant needs insurance. Life Insurance is to protect family in the event of unfortunate death. The big business men and industrialists do not need life insurance because their business will continue to run even after their death. The govt employees are well protected by their retirement/ death gratuity and group insurance schemes and dependant's employment. So they also do not need life insurance policy. Again an individual who has already saved enough for dependant's protection needs no life insurance. If spouse is also employed, need of life insurance is minimised. Noted Investmment consultant a.N. shanbhag has aptly advised against over insurance. The reason is that insurance has a cost which one must not incur if not required.
One should carefully assess future needs for children's education. While critical diseases will be financed by mediclaim insurance, children's education and expenses on marriage and other ceremonies also need provision by adequate investment planning. The best choice is to spend the least on occasions like marriage, birth or death and to spend more on maintenance of self and family. Even over investment is not good for financial health. so, while 10% should be the minimum saving, maximum should be 25%. Saving more will cause hardship at present. The best way is to save less but not to withdraw the investment except in old age or for the events for which saving is intended.
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