2016 Financial Planning: Buy Life, Health Insurance, Zero Risk Products

If you have not yet planned your finances for the financial year 2016-2017, then here are the tips on where to put your money for securing your financial future.

Buying insurance policy but first understand your objective: Often people put money in buying insurance (health, life, etc.) without even considering their objective and detailed offerings by the policy and later realize the mistake when their claims are rejected or they do not see any benefit, resulting in discontinuing the policy in between i.e. wastage of money. Most of us trust blindly on insurance agents whose main objective is to sell insurance policy. Listening and suggesting policy as per your need is not their first priority. So before you make a decision to buy any policy, do a thorough research on the coverage. You can also save money by buying policy online. When purchased through agents, you end up paying more as companies have to bear extra cost such as agent’s commission, etc.

Buy health insurance: Despite being one of the top medical tourism destination, cost of medical treatment is continuously rising and for Indians there are no visible signs of the expenses coming down. And for the people with no health insurance, unexpected medical emergency kills their hard earned savings. So make a resolution to buy best health insurance policy which will cover your whole family. Even if you have a group cover, buying a personal health insurance will come to your advantage. Because when you move to another company where group cover is not available or lose your job and medical emergency arises then your personal health insurance will come to the rescue.

Buy Life Insurance: Savings and security is the main reason for having a life insurance. And especially for a single earning member of a family, having a life policy is highly recommended. This is because in case of unfortunate event, your nominee will get pre-defined amount of money. So for securing the financial future of your family, buy a term insurance.

Invest in zero risk/fixed income investment products: There are broadly two categories of investment products viz: Zero Risk (PPF, KVP, NSC etc.) and High Risk (equities, mutual funds etc.). The major difference in both is that, no risk investment products offer guaranteed returns whereas risky products offer higher returns in the long run, but they are not guaranteed. For an individual who does not want to take a risk, investing in no risk products is a ideal solution especially PPF, Sukanya Samriddhi is recommended as the returns are guaranteed, though small compared to high risk products such as mutual funds, equities etc. In addition to this, you will get income tax benefit.

Invest in high risk products: This recommendation is only for investors who are ready to take risk. The benefit is that the returns are higher when invested for long term. Ideally historic performance of products is analyzed and calculated assumptions are made on the future returns. However, it is not always the case as products such as equities, mutual funds and others are dependent on various internal and external market factors and do not offer guaranteed returns. Moreover 2015-2016 was a roller coaster year for the Indian equity market as midcap funds delivered better returns in comparison to fixed income funds. You can also take help of financial advisors. If you are thinking of investing in stock market, go for sector specific stocks such as IT and pharmaceuticals. As per market analysts, these two sectors are expected to give good returns when invested for long term.

Invest for child’s future: For securing your kid’s future and giving them good education and saving money for their marriage, it is essential to start investing as early as possible. You can invest in various kinds of products as mentioned in this article. If you have a girl child then investing in Sukanya Samriddhi Yojana should be in your list. It is considered to be the best investment product for securing the future of the girl child. Moreover it gives assured returns which are best compared to other products such as public provident fund. The money received on maturity can be used for the girl’s education and marriage. Check out more on the features of SSA.

Apart from the above listed recommendations, it is highly important to follow the below listed rules. They look very simple but are very beneficial:

  • Maintain expense list: Writing down your everyday expenses will help in cutting the cost on unnecessary expenses. Every month end revisit these expenses and give a 15 minutes thought on how to save money in the next month. Trust me – this works.
  • Save money: Everyone wants to save money but still we end up buying unnecessary things and later realize the mistake. So aim towards saving money wherever possible – buy cheap medicines, look for low cost health care options, look for online deals/coupons, buy stuffs during offer season, sell your old stuffs online rather than dumping it.
  • Pay bills on time: Never miss on paying any of your bills after the due date especially loans and credit cards. This is because, you’ll end up paying higher interest and most importantly your credit score will take a hit. And any future application for loan or credit card might get rejected, if you are a frequent defaulter.
  • Keep track of all your investments: This is especially for those investors who trust blindly their financial advisors, fund managers, share broker, and others but do not themselves check performance periodically. It’s your money and its your duty to keep a check on it.
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