We are all collectively navigating unprecedented times. The COVID-19 pandemic has had a widespread impact on our lives. It has changed the way we interact with each other and the way businesses engage with their employees and consumers. It has also put the spotlight on risk and the importance of health. When it comes to dealing with risks related to health, we have traditionally been more reactive, looking at risk through the rearview mirror. Enrolling in exercise classes only when the weight crosses a certain threshold or eating healthy only on doctors’ orders is a common practice. However, among the many things that the pandemic has taught us, one is that we need to be proactive about risk. Inarguably, individuals are getting more health conscious and choosing a lifestyle that supports their physical, emotional, and mental well-being. However, more needs to be done. We also need to astutely plan our finances so that when life throws exigencies at us, we can choose to fight rather than flight. This is where financial planning can play an integral role in helping you maintain your financial health.
Below, we share a checklist with you, for you to take care of your financial health:
- Create an emergency fund: Whether you are facing a medical emergency, professional emergency or even a business emergency, access to funds can in some way alleviate the stress stemming from such emergencies. Which is why, in addition to your regular savings and investments, you should always keep aside a small sum of money earmarked for emergencies. This money can be invested in low-risk and liquid investments so that the capital is preserved and available to you when you need it the most.
- Keep a buffer for your liabilities: Many of you would have several financial liabilities ranging from a housing loan or a vehicle loan to even a personal loan. The EMI payments for these loans would be a fixed outgo for you during the duration of your loan. There might be certain events like a job loss or a reduction in salary that could have a substantial impact on your monthly cash inflows. However, even though your inflows reduce, your outflows, especially those related to your liabilities, will continue. Thus, it is always prudent to keep a buffer investment worth 12 months of EMI. This way, you will not need to let go of your asset while you look for alternate sources of income.
- Purchase adequate health insurance: Health insurance is often perceived as a cost. However, it should actually be considered an investment. Not a financial investment, but an investment in self-protection. You must ensure that you have an adequate health insurance cover that can take care of your expenses in case of a health emergency. One important thing to remember is that it is always best to take adequate cover. Often, people tend to take lower coverage in order to save on premiums. However, this defeats the purpose of purchasing a health insurance policy. To make health insurance more affordable, several insurance companies have launched a Health EMI product that can enable you to pay your health insurance premiums in EMIs.
- Create multiple streams of income: Undoubtedly, this is easier said than done. However, in today’s shape shifting world, where technology is enabling connectivity and faster interactions, there are indeed opportunities to create multiple sources of income. Just like portfolio diversification protects your portfolio from sharp negative movements in any one asset class, income diversification can come to your rescue in case there is a dent in your primary source of income.
- Invest judiciously as per your risk profile and return requirements: When you start your financial planning journey there are three key things that you must keep in mind. The first is the importance of diversification through portfolio allocation. The second is to invest as per your risk profile and ensure that the overall risk of your portfolio is commensurate with the amount of risk that you are able to absorb. And third, ensure that the overall expected return of your portfolio is aligned with your investment time horizon and financial goals.
- Stay disciplined: Maintaining a disciplined lifestyle can ensure that you remain healthy and are able to fight various diseases. Similarly, by ensuring that you create a robust financial plan and follow it in a disciplined manner, you will be able to keep your portfolio healthy and fight the volatile investment environment.
The best way for you to navigate the current times and take care of your physical health would be to mask up, stay indoors, and get vaccinated. On the other hand, the best way to prepare for a robust tomorrow would be to keep your financial health in check by following the above checklist.
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