Stop Procrastinating ……Start
Investing……
Before embarking on the
investment program, we need to make sure that the other needs are adequately
met. No serious investments should be started until a potential investor has
adequate surplus income after covering his day to day expenses and any other
obligations. The investor should also make sure that he/she has sufficient
funds to take care of any unexpected financial emergencies.
Emergencies, job
layoffs, and unforeseen expenses might happen anytime without any pre
indication. An individual must ensure that he/she is in a position to take care
of all these without having to sell his assets. It’s imperative for every
person to have a cash reserve to help meet these occasions. In addition to
providing a safety cushion, a cash reserve reduces the likelihood of being
forced to sell investments at inopportune times to cover the unexpected
expenses. It is usually recommended to have a cash reserve equal to 6 months’
living expenses. Calling it a ‘Cash Reserve’ need not necessarily mean that the funds should be
in cash; rather, the funds should be in investments you can easily convert to
cash with little or no loss in its value at the time of redemption. Money
market or short-term bond mutual funds and bank accounts are appropriate
vehicles for the cash reserve. They do earn a decent interest till you need the
funds.
Life insurance and
medical insurance should also be a component of any sound financial plan. Life
insurance protects our loved ones against financial hardship incase of any
untimely death . This helps to provide cash to the insured family members which
can be used to maintain their lifestyle, repayment of any debts, or to meet the
future needs (eg, children’s education, marriage etc ). So one of the preliminary step is to purchase
adequate life insurance coverage.
Health insurance helps
to pay the medical bills. Automobile or home insurance provides coverage in the
cases of accidents and damage to vehicles or residencies.
Hi Mohit,
ReplyDeleteOn a personal note, do you feel one should invest in insurance? It really has low returns and confusions in terms of what it covers. It would be benificial in you can talk a little more on that.
Insurance is not an investment. It is a prerequisite to investment. Insurance provides the safety cover to our dependents incase of any unfortunate events. It is a must to have Insurance before we plan our investments.
ReplyDeleteWould definitely write more on Insurance in the coming blogs.
Thanks for your comment. Keep posting and providing feedback.
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