There are flawed notions that Financial Planning is only for rich, which is not so, even one with surplus/savings of Rs 500/- per month could start Financial Planning to achieve various goals.
While planning, one has to always set aside funds equivalent to 3 to 6 months Salary/Income for meeting contingencies of Life where ups and/or downs are bound to happen. These funds should be kept in the form of Cash or Cash Equivalents, so as to redeem them as soon as possible. The contingency could be medical reasons, loss of job, economic slowdown in business and unseen circumstances. The Cash Equivalents could be defined as Savings deposit, Liquid Funds, Short Term Fixed Deposits and 2-in-1 Bank accounts.
Usually, Investors aim to build an Investment portfolio only whereas Insurance Portfolio is equally important as Investment. Investments could be in Real Estate, Direct Equity (Shares), Equity-linked instruments (Equity & Balanced MF Schemes), Bonds (Tax-free & Taxable), Debentures , Debt MF Schemes, Government Small Savings Schemes, Fixed Deposits, Bullion/Metal, Currency, Commodities, Art & Artifacts and Alternate Investment Schemes.
Insurance Portfolio should aim to cover protection in the form of Term Insurance equivalent to at least 10 times of annual income. The purpose is to make provision for regular income to the dependent family, in case of demise of the earning member. The endeavour should be to get the protection immediately after commencement of employment/business. This will ensure the adequate coverage at low premium that gets blocked for a longer duration to cover the risk, depending upon annual income. Second aspect is to cover oneself with personal accident insurance cover for which a nominal premium may be required or it could be obtained as rider with Term Insurance Cover.
Health Insurance (family floater) for self and family is required to cover hospitalization expenses. In case employed with Government/PSU/Corporate, health coverage is provided by the employer but additional coverage is advisable depending on cost of hospitalization or non-availability of health insurance cover post-retirement. Critical-illness is an expensive proposition for which an exclusive policy may be obtained or a top up insurance cover could be taken along with health insurance cover.
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