Thursday, 20 August 2015

5 Financial Steps You Must Take When Planning to Start a Family

Posted by MyInvestmentsPub
A completeness in the life comes with Children. Children bring us a sense of happiness and contentment in our lives. Once you become a parent, apart from emotional changes, there are some financial changes that you must bring about in your life for the well-being of your little one. You must take some financial resolutions as and when you start a family for smooth sailing of your financial life. What are those financial resolutions? How we can achieve these resolutions??


5 Financial Steps You Must Take When Planning to Start a Family

1. Revise Your Financial Goals:


As your family is growing with your little ones and it is the right time to revise your financial goals. So far you have personal goals such as your retirement, your vacation, your home etc. But, from now on wards, you will also have to include your kid's financial goals such as school education, higher education, marriage etc. So, you need to estimate the amounts required for these financial goals by considering the inflation factors and required to invest every month accordingly.

2. Revise Your Insurance Needs:



Your family is growing. It means your dependents are increasing which indicates the need of more insurance coverage. Because you are the only bread-winner in the family, you need to increase your term insurance coverage in such a way that the sum assured should take care of your entire family's financial needs in the absence of your presence (in case of untoward incidence such as permanent disability or even death happening to you). As I mentioned in my earlier posts, do not take any endowment or money-back policies. Opt only pure term insurance policies. Taking online term insurance policy would reduce your premium costs.

3. Revise Your Health Insurance Coverage:


Health insurance is the next important step to take care your family medical expenses. If you have already having an Health insurance, try to increase the insurance sum to take care of your little kid's medical expenses as well. If your employer providing Group Health insurance, it is always advised to take 3rd party Health insurance for your entire family (excluding your parents). During job change or job loss, this 3rd party health insurance would take care of your medical expenses.


4. Reduce Your Unnecessary Expenses:


Since your family is growing, it will add up additional expenditure to your pocket. Based on your income, assets and age you need to reduce your unnecessary expenditure to take care of the additional expenses. You can reduce your unnecessary costs by reducing the frequency to go hotels, vacation, movies etc. Divert this additional savings to your financial goals. Differentiate needy and luxury clearly and prioritize accordingly. A family budget is required and strictly stick to it to reduce your expenses.

5. Identify Right Investment Products:


You have defined your financial goals. Now, you know the time horizon to achieve these financial goals. Based on this time horizon you can choose investment product with appropriate risk appetite. Generally your kid's financial goals are long-term goals, hence you can link these goals with risky investment products. Equity Mutual funds are the right choice for long term financial goals. Like wise, your retirement is also a long term financial goal. One important thing to remember here is, you should not break your retirement corpus to fulfill other financial goals. I know sometimes parents, for the sake of their children's needs such as education, marriage or even getting them settled in whatever way; break their retirement kitty. This often leads to harming their long term financial health. Funds kept aside for retirement should not be used as this would leave you helpless in the second innings of your life.

Conclusion:

A systematic investment approach with defined financial goals by linking to appropriate financial goals would lead to a smooth sailing of your financial life.

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